​Fixed income returns in 2014 have surprised many, bearing in mind the consensus coming into the year that government bonds would underperform and investment grade corporate bonds would have a challenging time. Instead, performance has been strong with convergence in returns across the major asset classes.

Jenna Barnard, Co-manager of the Strategic Bond Fund, looks at the recent drivers of this market and explains how their funds have been able to take advantage of the conditions.

Looking ahead to the rest of the year, she surmises that while the environment might become challenging for government bonds and investment grade corporate bonds, high yield is likely to fare better, where returns would be income-driven in general with some capital appreciation on selected names. Here, there are encouraging signs with jumbo deals coming to the European high yield market at attractive valuations. Elsewhere, pockets of opportunity exist in some legacy subordinated banking bonds.