Charity investors should avoid UK corporate bonds in favour of US high-yield and emerging bond markets, warned investment manager Baring Asset Management.
The firm's global head of fixed income, Rory Macleod, said: "The fixed income market is growing rapidly where UK corporate bonds, for example, made up 55 per cent of investment fund net sales in June.
"However you need to be very careful where you invest in the fixed income marketplace.
Indeed, we believe that UK investment grade corporate debt is currently not the most attractive of options," he said.
According to Baring, this is because of the huge growth in the number of corporate bond funds, the growing purchase of debt by pension funds, and pressure on life assurers to hold more bonds.
The firm is recommending US high-yield bonds because of the expected recovery in the profitability of US companies. It predicts they will offer a "significant payback to investors".