As more government bonds see negative yields, the one-time safe-haven has become a "lousy proposition" for longer-term investors, said Ng Kok Song, the former chief investment officer of Singapore sovereign wealth fund, GIC.
Fixed income assets have been on a tear in recent months on expectations that major central banks will keep monetary conditions accommodative to goose their economies.
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Investors have been paying the governments of Japan and many euro-zone countries for the privilege of parking their funds.
Even some countries with patchy credit histories have recently garnered robust demand for their debt: Argentina managed to sell a large chunk of bonds with minimum fuss having been locked out of capital markets for 14 years. Ireland, which had to suffer the ignominy of a bailout in 2010, recently wrapped up a sale of 100-year bonds.
But Ng saw signs of concern amid the rally.
"Yields have come down so much so what we are looking at the risk of investing in bonds is what is the yield you get per year of duration of the bond," said Ng at the Credit Suisse Megatrends conference last week.
"It has come down dramatically, so there's very little room for error and if by chance the global economy normalizes, interest rates go up, you're going to start looking at capital losses."
Bond prices move inversely to yields.
The proportion of the government bond market with yields in negative territory isn't small: More than 27.2 percent of the JPMorgan global government bond index, accounting for more than $6 trillion worth of bonds, have negative yields, Reuters reported in March.
Fixed income investors are coping by buying riskier debt, noted Ng, who is currently the chairman of Avanda Investment Management, which reportedly received start-up funds from both GIC and another Singapore sovereign wealth fund, Temasek.
"If you want to make a return, you then have to take credit risk," he said. "If you take credit risk, you look in corporate papers. You can take credit risk in emerging market papers. Investment grade bonds and some sectors of the high-yield market still offer a very nice spread."
He noted that Asia's corporate bond market is also developing rapidly.
"Some of these are good credits offering reasonably attractive yields because most of them have not really gotten good credit ratings," he said.
But even those bets represent a belief that interest rates will stay lower for longer, Ng noted.
"If that is not true, even your corporate papers are going to be negatively affected," he said.
He was cautious on emerging market paper due to currency risks; if the currency moves against you, "your little bit pick up in yield is gone," he said.
However, as a short-term play, Ng noted bonds can offer some returns.
"Even as we approach negative short-term interest rates, there are still a lot of bonds that give positive returns," he said.
"As short-term interest rates go more negative, whatever is positive [yielding] now in bonds will go lower. And there are people who make a lot of money or whose investment strategy hinges basically on borrowing short-term to invest long-term."
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1