Some analysts warn low interest rates can only go up from historic lows as economies begin to improve, which would cause bond yields to rise and investors holding long-dated debt to be caught out in a very illiquid market.
A number of managers have been cutting the duration on their funds to protect against this potential rate rise – most recently FE Alpha manager David Coombs told FE Trustnet he was keeping the duration on his funds close to zero.
However, Jones says that the huge amount of debt in the system means interest rates will have to stay low for a long time for it to be payed off, and that investors do not need to position themselves with rate rises in mind.
Kames is keeping duration embedded in its portfolios, he explains.
"There is a huge amount of excess debt in the economy which is still to be worked off," he said.
"Though western governments have made an attempt to solve the issue, their debt burden has not lessened to any dramatic degree. With that debt burden, it either has to be serviced or it will be defaulted on."
"In order to service that debt, interest rates will have to stay low for longer, especially in the US where the economy is very susceptible to interest rate volatility."
"We are not in the 'bond bubble' camp as interest rates cannot be hiked up higher, because both governments and individual consumers wouldn’t be able to support the economy if that were to happen," he added.
Jones used to be co-head of fixed income at Kames until he was promoted earlier this year, and currently runs the £285m institutional Kames Inflation Linked fund.
According to FE Analytics, the fund has returned 34.63 per cent since it was launched in 2010, while the IMA Mixed Investment 0%-35% Shares sector has returned 18.53 per cent – meaning it has been the second-best performing fund in the sector over that time.
Performance of fund vs sector since July 2010
Source: FE Analytics
Jones explains that across Kames’ fund range, the managers take a long-term strategic top-down view of the markets.
He says that this is why the group believes the bond-bubble worry is unfounded.
That view also leads him to believe that certain risks have been taken out of the economy because of policies pursued by the world’s central banks.
However, he says there are still a number of large headwinds facing investors in the current macroeconomic environment.
"We take a long-term strategic view, but I believe that this quote that 'hysteria may have come out of the markets but that is just because those in charge are administering their most potent tranquilisers' is very apt for the state of the current markets," he said.
"We have moved out of an environment where tail-risks have dominated the markets, into a core environment, or one of normality."
"This has been brought about, to a large part, by the ECB and Mr Draghi, who has managed to calm the hysteria around the markets without actually spending a penny – which is a phenomenal ability," he said.
"There are a number of tail-risks facing investors, but now because of rhetoric from the ECB we have moved into a different economic backdrop from the possible chaos that could have ensued."
"However, there are problems that are still embedded which haven’t been solved."
"These include excess debt in the economy, a watershed of monetary policy, joblessness, fiscal imbalances and protectionism."
His thoughts were echoed by David Roberts, who is head of fixed income at Kames.
"Our view is that central banks remain active, not on hold," Roberts said.
"We think that there is the possibility of yet more stimulus to come as central banks from both the US and Japan have particular targets for employment figures and inflation, respectively."
"Any type of asset class with a yield or income has proved to be resilient. We feel that beta has been better than expected and though volatility in fixed income has been higher than expected, it means we have been able to add alpha."
"The central bank’s quantitative easing has benefited both equities and fixed income, but while fixed income has provided a floor for markets, investors aren’t going to get much from government bonds in terms of capital growth."
"Our core view is that the last place you want to be in this environment is cash," he added.
Roberts told FE Trustnet last month that "just shutting your eyes and buying beta" would work in the current market.
