Bill Eigen: Bond Funds Will Go Bust

Successful fixed income investor Bill Eigen quit his job as a long-only bond fund manager because he believes the sector has only one way to go and didn't want to lose investors' cash

Emma Wall 4 December, 2014 | 2:21PM

Bond prices have only one way to go – and that’s down, according to successful fixed income investor Bill Eigen. In fact things are so bad, that Eigen professes to never have been more nervous as a bond investor in his entire career – which includes the 1994 bond market crash.

Eigen called time on his own long-only bond fund when he recognised that the future looked bleak for the asset class. The fund manager said he did not want to have to call investors and tell them they could not afford to move house, or pay for their children’s education because the bond market had tanked. Instead he now runs an Absolute Return bond fund for JPMorgan, which can hold large cash positions and short the bond market.

“The common sense case for bonds is bearish,” said Eigen, speaking in New York this week. “The bond market is based on simple quantitative measures – if yields fall you will lose money in real terms because of inflation. If they go negative you are paying someone to look after your cash and you will lose money. If they rise, then prices will fall and you will lose money.”

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Emma Wall  is former Senior International Editor for Morningstar

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