Snowden, who heads up three bond funds at Kames, insists investors should be extremely wary of liquidity issues in the asset class, particularly among funds that have experienced a sharp influx of cash in the last five years.
The FSA surveyed corporate bond fund liquidity earlier in the year and Snowden says this should serve as a warning to massive bond funds.
"The time for denial is gone," he commented. "We have to accept liquidity is challenging and that trend is very much going to get worse."
"Market liquidity has disappeared and may well be gone for a long time. It’s not that this is a temporary period of indigestion and then things will go back to normal."
UBS recently announced it would be cutting its fixed income operations, which Snowden says is a huge red flag for the industry.
"UBS is a cornerstone of market-making fixed income. For them to wind down is a development nobody wants," he explained.
"Shareholders are rewarding banks for pulling away from fixed income because regulation has made it unprofitable to run."
"There is growing shareholder pressure to wind down fixed income trading activities simply because they are cost-intensive to run."
Snowden is particularly critical of the large size of many funds in the sector and warns: "The challenge of investing larger cash piles just gets incrementally hard and harder."
He says managers who were running relatively small corporate bond funds five years ago cannot possibly replicate the process that produced solid returns during the credit crunch.
"It’s simply impossible to replicate the strategy of five years ago," he added.
The manager says £100m is the optimum size for a Corporate or Strategic Bond portfolio and successfully investing in the current fixed interest climate becomes considerably more difficult after that point.
"£100m is not terribly sustainable and wouldn’t generate a lot of fees to shoulder the burden of increasing regulation," he added. "It’s not viable as a business and therefore we all have to run funds that are bigger."
"But the further you get away from £100m, the more difficult it gets."
The manager runs the £450m Kames Investment Grade Bond portfolio, as well as the much smaller Kames Investment Grade Global Bond and Kames Absolute Return Bond funds.
Snowden’s views will be considered controversial by M&G, Invesco Perpetual and Fidelity, which all assert liquidity is not an issue in their multi-billion pound bond portfolios. However, M&G has moved to slow flows across its range.
Snowden also warns of the problems investors could face when exiting large portfolios, as it becomes more difficult to sell a big ticket.
He believes the vast majority of investors are likely to be unaware of the composition of the portfolios and how far they may have deviated from the way the fund was run when they bought in.
"I don’t know if people signed up for a corporate bond fund with a lot of foreign currency risk, a lot of credit risk and a lot of equity risk, but that’s what you’ve got," he said.
"The fund might not be what you bought five years ago. It’s always fine until these things go wrong, but when things go wrong, bonnets are lifted and 'Oh, that’s not what I thought was in there'."
According to FE data, four of the top-10 best-selling funds of the last 12 months are fixed interest portfolios.
Across the three IMA bond sectors, 56 have more than £1bn in assets under management (AUM). This equates to 16 per cent of the whole market.
Performance of manager vs peer group over 10-yrs
Source: FE Analytics
In spite of a dreadful 2008, Snowden has outperformed his peer group composite over a 10-year period, with returns of 57.83 per cent.
His Kames Investment Grade Bond fund has delivered 17.48 per cent since he started running it in late 2011, compared with 13.84 per cent from its IMA Corporate Bond sector average.
It has a minimum investment of £500 and a total expense ratio (TER) of 1.31 per cent.