In the midst of this year's once-in-a-lifetime rally in corporate bonds, some investors already see the specter that rising interest rates in the future could destroy much of their gains.

A few are even starting to protect themselves, while the risk is still months away and the price of hedging is low.

The biggest risk in credit over the longer term has moved from default risk to interest rate risk, said Jamie Stuttard, head of pan-European fixed income for Schroders, which had $32 billion in fixed income assets under management as of end-June.

Corporate bond funds are sucking in investors because spreads still exceed historical averages, even after huge price gains in the rally. Spreads are the extra yield companies must pay over money market interest rates or government bonds.

At the same time, interest rates are at all-time nominal lows, with the Fed funds rate at zero to 0.25 percent.

Investor desire to shield against rate rises has swollen Schroders' new SIF Global Credit Duration-Hedged Fund from 12 million euros ($17.79 million) to 250 million euros of assets in the past 10 weeks.

The more retail type of investor, the more conversations we have had about hedging interest rate risk, said Maria Ryan, director of investment strategy for Barclays Global Investors, with 301 million pounds ($498.2 million) in fixed income assets under management.

BGI is now launching six new Credit Selection funds for retail and institutional clients -- three duration-hedged funds in dollars, euros and sterling and three non-hedged funds in each of those currencies.

It's because we are seeing interest in both types of funds that we have had to do both, Ryan said. It's coming from clients deciding whether they want rates exposure or not.

(Editing by Simon Jessop)