Why staying in cash could cost you

And why short-dated strategies may be the answer

The past two years have been exceptionally challenging for fixed income investors. Spiralling inflation led to one of the most aggressive rate-hiking cycles on record, however, we believe the market for bonds is now looking much healthier.

But, while bonds are once again finding their form, investors have found themselves sitting on cash balances of 30% to 50%. This capital preservation trade has made perfect sense, but does it still make sense as we reach terminal rates? The opportunity cost right now of having no duration, and therefore no chance of future capital gains, could be doing a disservice to clients.

Some corners of the bond market look more appealing than others, with short-duration bonds proving particularly compelling. One of the main drivers of this is that yield curves remain inverted. In normal market conditions, yields for longer-dated bonds are higher than shorter-dated ones. But in current market conditions this appears to not be the case, with the yields on one-year bonds higher than those with maturities of 10 or 30 years.

Read more below on why we believe the time is right for fixed income and why short-dated bonds, in particular, could be the answer to the cash dilemma.

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Share class Currency ISIN Valor NAV YTD As at
AHN (hedged) CHF LU1734078154 39471995 78.47 0.41% 21 May 2024
AHN (hedged) EUR LU1683487620 38261757 81.00 1.41% 21 May 2024
AI GBP LU1267852249 29030549 86.93 2.01% 21 May 2024
AQG GBP LU1530788402 34854330 98.12 2.06% 21 May 2024
AQHG (hedged) USD LU1767065979 40241908 100.02 2.09% 21 May 2024
AQHG (hedged) EUR LU1530788238 34854291 88.20 1.49% 21 May 2024
AQHN (hedged) EUR LU1331789450 30670277 91.47 1.40% 21 May 2024
AQHNG (hedged) USD LU1410502493 32553207 102.40 2.07% 21 May 2024
AQN GBP LU1331789377 30670273 103.97 1.99% 21 May 2024
AQNG GBP LU1368730674 31599783 98.53 2.05% 21 May 2024
G GBP LU1273680238 29168014 122.94 2.07% 21 May 2024
HG (hedged) EUR LU1925065655 45492332 104.44 1.48% 21 May 2024
HI (hedged) CHF LU1599320444 36446926 98.14 0.48% 21 May 2024
HN (hedged) EUR LU1734078238 39472001 100.87 1.43% 21 May 2024
HN (hedged) CHF LU2270707495 58756780 94.96 0.40% 21 May 2024
HN (hedged) USD LU1767066357 40236072 114.29 2.04% 21 May 2024
I GBP LU1267852082 29030420 121.59 2.01% 21 May 2024
N GBP LU1267852595 29030838 121.16 1.99% 21 May 2024
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Share class Currency ISIN Valor NAV YTD As at
AHI (hedged) EUR LU2081486727 51133685 86.04 1.37% 21 May 2024
AHI (hedged) USD LU2210409616 56212864 102.35 1.95% 21 May 2024
AHI (hedged) CHF LU2210410036 56212872 90.62 0.32% 21 May 2024
AN GBP LU2386632371 113621592 96.19 1.92% 21 May 2024
AQG GBP LU2081485596 51132454 94.17 2.00% 21 May 2024
AQHNG (hedged) EUR LU2081486487 51132510 92.17 1.40% 21 May 2024
AQHNG (hedged) USD LU2403268092 114481675 96.45 2.01% 21 May 2024
AQI GBP LU2081485919 51151249 95.94 1.93% 21 May 2024
AQN GBP LU2081486057 51151278 97.86 1.91% 21 May 2024
AQNG GBP LU2081485679 51132474 93.57 1.98% 21 May 2024
G GBP LU2081485240 51132430 105.96 1.99% 21 May 2024
HI (hedged) EUR LU2081486560 51132543 99.78 1.29% 21 May 2024
HI (hedged) CHF LU2210409962 56212870 96.60 0.34% 21 May 2024
HI (hedged) USD LU2081487709 51155828 106.05 1.95% 21 May 2024
HNG (hedged) EUR LU2081486214 51132436 99.38 1.38% 21 May 2024
HNG (hedged) USD LU2386631993 113621000 104.10 2.04% 21 May 2024
N GBP LU2081485836 51151238 103.67 1.92% 21 May 2024
NG GBP LU2081485323 51132452 105.75 1.98% 21 May 2024

Important Information

This page and the content contained therein is for professional investors only. 

The views expressed represent the opinions of TwentyFour as at November 2023, they may change and may also not be shared by other entities within the Vontobel Group. TwentyFour, its affiliates and the individuals associated therewith may (in various capacities) have positions or deal in securities (or related derivatives) identical or similar to those described herein. 

Past performance is not a reliable indicator of current or future performance and an investment can go down as well as up meaning capital is at risk. Any projections, forecasts or estimates contained herein are based on a variety of estimates and assumptions. There can be no assurance that estimates or assumptions regarding future financial performance of countries, markets and/or investments will prove accurate, and actual results may differ materially. The inclusion of projections or forecasts should not be regarded as an indication that TwentyFour or Vontobel considers the projections or forecasts to be reliable predictors of future events, and they should not be relied upon as such

For Professional Clients only. This is a financial promotion and is not investment advice. Any views and opinions are those of the investment manager, unless otherwise noted. This is not investment research or a research recommendation for regulatory purposes.