Speaking at Jupiter’s annual investment dinner, Bezalel said he had slashed duration ‘pretty aggressively’ last year and it had had reached a low of one year.
However, this had now changed due to changing conditions in the US, the sector stalwart said. It has risen to 3.3 years in the Jupiter JGF Dynamic Bond fund.
'We are looking at certain things which tell us that maybe the US isn't as hot as people make it out to be. If anything we have seen a tightening in lending standards in the United States, while we are seeing a growth in the money supply beginning to roll over a bit,’ Bezalel said.
'So there are some things that tell us that, with the back up in US treasury yields we have had, it's really time to lengthen duration. We think US treasuries are starting to look like reasonable value once again.'
In August 2016, Bezalel sold out of 20- and 30- year US treasury bonds, which reduced duration in the portfolio from six years to 4.5 years.
According to the latest available fund factsheet, the effective duration in the fund at the end of January was 1.13 years. The top holding in the fund is US treasuries at 4.3% and Bezalel has an 11.6% long geographical allocation to North America.
Scope for disappointment
Bezalel said the Federal Reserve was unsure about what President Donald Trump would do and this was their reason for reducing the amount of planned interest rate hikes.
Bezalel also said investors should be aware that Trump may not keep his election promises.
‘The other thing I am concerned about, is that we are heading towards what I am calling a ‘Trump gap.’ We are getting to a period where between now and when Trump has to deliver. My concern is that there is scope for disappointment,’ he said.
‘I think it is highly unlikely that he is going to get his trillion dollar infrastructure spending plan through. I think that is going to be watered down. There is even talk that on the tax reform it will be pushed back to next year.’
Over three years to the end of February 2017, the Jupiter JGF Dynamic Bond L USD Q Inc HSC returned 22.28% in US dollar terms. This compares to a rise of 11.37% by its Citywire-assigned benchmark, the Bloomberg Barclays Global Aggregate USD Hedged TR, over the same time frame.