Interview with Stephen Jones, Chief Investment Manager, Kames Capital
BondGuide: Mr. Jones, how do investors deal best with the bond markets in these times?
Jones: Indeed, this is not really easy in view of the numerous political decisions everywhere. In our absolute return bond funds, we are solving this with arbitrage transactions and futures. The volatility is unbeatably low while achieving returns through LIBOR.
BondGuide: Are bond managers currently doing something wrong?
Jones: No, this cannot be said. Most of them would like to take up the upside potential and do not want to suffer in phases of market weakness. Unfortunately, this does not work very often.
BondGuide: Is the BrExit a sure thing? In Germany, it seems as if all this had to be discussed again in the UK.
Jones: The BrExit will come for sure. However, not much progress will be made before 2018, as the exit conditions must be approved on both sides through all instances, and this may take time. However, Europe should not worry: Instead of 500 million inhabitants, a population of 430 million people still belong to the EU.
BondGuide: What was your vote on June 23rd?
Jones: Well …I was for remaining in the EU and within our team 18 out of 20 have expected a majority for remaining in. Therefore, you can imagine our surprise. As this is usually the case when being caught on the wrong foot, our funds have suffered a bit in the first two weeks following the referendum. Afterwards everything normalized quite quickly. In the meantime, the British have taken up the task of making the BrExit a success instead of lamenting – and we as fund managers have to do the same. It is as it is.
BondGuide: What does a fund manager advice bond investors?
Jones: It is true that the wealthy individuals tend to be elderly persons, which are not keen to take the big risk in their portfolios. This is perfectly fine and certainly the case in every country. Nevertheless, one should tell them that they are currently allowed to take at least one step on the chance-risk ladder upwards by reducing their government bonds with negative returns. Do not be too fearful in this respect!