The trend of DFMs increasing their exposure to strategic bond funds continued in the final quarter of 2023, with the average allocation now above 6 per cent. 

The 6.6 per cent average at the end of December compares with 3.7 per cent for December 2022.

The biggest determinant of returns from fixed income allocations over the past year has been duration, with very sharp market gyrations as investors picked through the entrails of central bank commentary for hints as to the direction of the base rate.

The story of 2022 was very much one of strategic bond funds being wrong on duration, mostly being long when short was the better call. 

That perhaps explains the decline in interest in such funds that year, although 2023 was hardly a period where the duration call was any easier, with economies again proving more resilient than expected.

But all of that entrails-gazing by market participants has predicted a new certainty: that rates will soon be cut. 

In a world where the duration call is easier, perhaps allocators views are that individual security selection will become the primary determinant of performance, and so choosing funds with the capacity to invest in the widest range of assets may be the intuitive call. 

The DFM with the greatest exposure to strategic bond funds is Hawksmoor at 21 per cent, while Quilter's Cirilium funds are on 17 per cent.

Among the allocators with zero exposure to those funds are AJ Bell and the Evelyn Active range.