Managers warn of derivatives risk

Fixed income managers believe that the growing use of complex instruments could damage the market, especially as less-seasoned players pick up on the trend

Better accounting standards have improved the fixed income sector and lessened chances of unforeseen blow-ups hitting funds, but managers fear that increased exposure to credit risk via the use of derivatives makes the fixed income market vulnerable both to falls in equities and rises in volatility.

Daniel Beharall, manager of Henderson Global Investors' Global Fixed Income Absolute Return fund, says some of the structural changes to the fixed income arena are permanent.

While the improved