Help with choosing bond fund

pinkllama

I've decided it's time to de-risk a bit and so have decided to put some funds into a bond fund.
I understand that interest rates are at historic lows, QE etc has pushed prices higher, yields lower.
From what I understand, if interest rates/inflation start to go up unexpectedly, it's better to have lower duration bonds.
I've looked at a fair few bond index funds and discounted the following;
iShares Gilt index - too long maturity/duration
iShares short dated Gilt index - too short! yield doesn't even pay the fund fee of .2%
Vanguard Global bond Index GBP hedged - contains corporate bonds.

I've interested in Vanguard US Government Bond Index GBP hedged.
The current yield is 1.85%
AAA rated
Duration of 5.87 years (58% of the bonds have a maturity of under 5 years)
Hedged to £

Is this a decent choice? Does anyone have any other suggestions?

Thanks

Thrugelmir

pinkllama wrote: »

I've interested in Vanguard US Government Bond Index GBP hedged.
The current yield is 1.85%
AAA rated
Duration of 5.87 years (58% of the bonds have a maturity of under 5 years)
Hedged to £

Is this a decent choice? Does anyone have any other suggestions?

Fed has announced plans to start selling off bonds bought from their balance sheet this year. Expect interest rates (yields) to rise on the back of this action.

dunstonh

Broadly speaking, bonds are split between gilts, index linked gilts, global bonds, global high yield bonds and UK Corp bonds. So, when building your portfolio, you should have appropriate allocations to those. Although, most models tend to see certain types of bond not being present in certain risk profiles and given the bond position at this time, certain types of bond are not attractive and may be missing or heavily reduced compared to their historic levels.

So, have you built your portfolio to follow a model or is it a bit of random pick and select? If it is a model, what allocations does it have to the various types of bonds?

pinkllama

It's just random. I've been relying on 90% equities and 10% cash for my investments.
Whatever bonds I choose, I'd like them to stand a chance of keeping up with inflation over the medium to long term and to keep their value if the stock markets crash so I can sell a proportion of the. Inde into equity. I will never require the bonds to provide an income as I have other non equity investments.