ultimatexpoker| World's rapidly aging fund managers say U.S. Treasury bonds are too risky to hold

Idanna Appio worked at the Federal Reserve Bank of New York for 15 yearsultimatexpokerAnalyze the history of the sovereign debt crisis. Now, as a fund manager at $138 billion First Eagle Investments, she has concluded that U.S. Treasuries are too risky to hold.

The Fed is expected to cut interest rates, but Appio's judgment is far more than just about the timing of interest rates. It is closely related to a new era of accelerating inflation, increasing government medical spending and widening deficits. What's behind all this? The fact that the world is aging rapidly, and now is the time to keep your portfolio up to date.

Instead of buying assets considered the safest in the world to balance her stock and credit holdings, Appio added gold. She believes that yields on long-term U.S. debt do not provide enough compensation, and says U.S. government borrowing has surged, which many people fear could trigger a debt crisis in the next few years.

Appio's strategy is to avoid longer-term bonds, which could bear the brunt of a deterioration in public debt conditions due to rapid growth in aging-related national spending. Other large fund managers such as BlackRock, Royal London Asset Management and Germany's DWS Group are also looking for ways to invest and protect client funds in this environment.

The impact on financial markets has affected all asset classes and regions, and there is no one-size-fits-all solution. Many of the strategies adopted to deal with an aging world reflect inflationary concerns: reduce bonds and increase stocks and commodities.

"We think demographics are a slow-moving train, but it's not," said Erik Weisman, portfolio manager at MFS Investment Management, a $607 billion asset firm. "This is a train speeding towards us. If you don't get off the tracks, you will be killed."

Recent evidence supports the urgency. South Korea's fertility rate has hit a record low, and figures in Italy and Germany are also declining. BlackRock CEO Larry Fink and investor Stanley Druckenmiller both warn of the looming retirement crisis. When Fitch downgraded the United States last year, it listed the cost of population aging as one of the reasons.

Appio said the United States "has very high debt levels and we are about to face many aging-related challenges that lack the funds to deal with." Yields on longer-term government bonds "really cannot compensate for long-term risks."