3 Government Bond Funds

Getting a reasonable yield on government debt is hard to come by, so we've chosen some active funds that can help you meet your goals

James Gard 7 October, 2020 | 8:53AM

Currencies in a suitcase

UK investors have flocked to government bonds this year as they have provided safety in a volatile environment. But yields are negligible and in some cases negative: currently a UK Government 10-year Gilt yields 0.18%, while the two and five-year gilts are negative. On top of that, the popularity of bonds means that prices have been driven up to new highs, so those investors buying the two, five and 10-year gilts and holding to maturity are guaranteed to make a capital loss. So you are effectively paying to lend to the British government.

Where does that leave investors who want exposure to fixed-income in their portfolio? One way is to go down the active route and choose a fund that manages that risk for you, and tries to achieve a decent yield while maintaining bonds’ traditional capital preservation benefits.

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About Author

James Gard  is content editor for Morningstar.co.uk

 

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