For generations, investors have turned to government bonds for a sense of stability. They’re seen as a source of predictable income and a safe haven in a complicated world – especially in the case of highly rated bonds like Australia’s. That’s why government bonds have often ‘played defense’ in the portfolios of retirees and pre-retirees and of not-for-profit organisations that need some capital stability and the ability to generate income to fund operations.
Perpetual Private’s investment team has prepared a comprehensive paper to explain the role bonds play in your portfolio. You can download the paper – or read our concise view below:
Whilst rising rates have pushed down bond returns, they are, in some ways a self-correcting mechanism. “Right now, Central Bankers are walking a tightrope,” says Perpetual Private Investment Director, Emily Barlow. “They’re raising rates to stop inflation getting entrenched into economies. But they don’t want to raise so fast and so high that they kill growth altogether. Once they see inflation coming under control, it’s likely they’ll ease rates again, which will be good for bonds. And in the meantime, investors who hold bonds for income will have captured the benefits of higher rates.” Recently, losses in bond markets and the threat of rising interest rates have raised doubts about the value of bond holdings.
Bond markets are heavily influenced by macroeconomic factors, more so than equity markets. In this paper we look at how bond markets have got to where they are and how bonds can be expected to perform in different market conditions; from high growth environments with accelerating inflation like we have now, through to recessionary environments with growth contracting. We also explore the benefits of active management for mitigating risk and offer our insights for the road ahead and how we’re preparing clients’ portfolios.
Whether you’re an individual or a not-for-profit organisation, the choice to invest in bonds will always come down to your own needs. History suggests they are good for investors who want predictable and stable income and are a useful counterweight to equities in a diversified portfolio. A chat to a Perpetual Private financial adviser can help you assess whether bond investing will work for you and what strategy to take when managing your bond holdings.
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Years of experience: 10
Emily is responsible for providing strategic advice and research to Aged Care and Not for Profit clients across Perpetual’s Private Wealth business. Emily has 10 years of experience in financial services across Australia and the UK and is based in Sydney.
Prior to joining Perpetual, Emily was a Senior Consultant at Mercer providing investment advice to a range of institutional clients specialising in superannuation and post retirement. As part of her role at Mercer, she also led a number of research initiatives on wellness, needs and solutions in retirement.
Before Mercer, Emily was an Investment Strategist at State Street Global Advisors (SSGA) in London developing new Defined Contribution investment products and building out SSGA’s European retirement offering.
Emily holds a Masters in Chemistry from the University of Oxford, the UK Investment Management Certificate and the Chartered Financial Analyst designation.
Years of experience: 1
Years at Perpetual: 1
Jai joined Perpetual Private’s Investment Research Team in February 2022 as an Investment Associate.
Jai supports the Head of Managed Accounts and PP Investment Directors through the creation and ongoing maintenance of investment content and collateral and supports the communication of the PP investment offer to advisers and intermediary sales.
Jai joined Perpetual as part of Perpetual Private’s graduate program in February 2021. Jai completed his Bachelor of Commerce (Econometrics and Finance) from Monash University and is a CFA level II candidate.