Bond managers want to be let off the leash. This conservative breed, which talks of yield curves and duration, and measures success in fractions of basis points, is starting to speak a new language. It is the lexicon of the hedge fund industry and the bond managers think they can beat the hedgies at their own game.

Emanuele Ravano, head of European bonds at Pimco, believes the steady decline of hedge fund returns is creating an opportunity for traditional bond managers. "Hedge funds haven't got a leg to stand on with single-digit returns, given the fees and risks involved. Net of fees we can end up not too far away from where the hedge funds are, with the exception of a handful of managers. But to provide a higher absolute return we need the total toolset."