Barclays Wealth has urged investors to hedge against rising inflation expectations, as these will hit long-dated bonds even though the UK firm does not expect inflation to take off sharply.

The firm, in its monthly strategy note, said investors should retain exposure to Asian assets but be selective, avoiding buying indices of Asian assets and preferring a more active approach instead. It said investors should also consider Western firms with strong revenue earnings from Asia.

“We no longer want to leave the impression that we’re more worried about the potential pain of a double-dip than the opportunity cost of missing a continuing rally. Investors whose portfolios are still positioned defensively should move toward a normal risk posture,” said Aaron Gurwitz, head of global investment strategy at Barclays Wealth.

Worries about inflation have been stoked by the big expansion of the money supply in countries such as the UK and US, a process that some economists fear will eventually feed through into higher prices.

Among other ideas, Barclays Wealth says investors should increase exposure to the Brazilian Real because Brazil offers an attractive inflation-adjusted interest rate of 4.5 per cent. “The BRL [Real] continues to look cheap and should strengthen further against developed currencies,” it said.