Aeon Investments: Fixed income investors show increased risk appetite
Aeon Investments: Fixed income investors show increased risk appetite
Eighty-four per cent of institutional fixed income investors will increase their level of risk in the next 12 months, as they boost overseas investments in search of extra return.
That is the finding of research commissioned by Aeon Investments, a London-based credit-focused investment company, among senior investment managers at pension funds, insurance asset managers, family officers and wealth managers from the UK, the US, France, Germany, Hong Kong, Italy, Sweden, Singapore, Switzerland, UAE, and Saudi Arabia.
The research reveals 15% of investors will keep risk levels the same while 1% will make dramatic decreases. Looking to the next three years, risk levels will increase still further. More than a third (38%) of investors say they will make dramatic increases and 44% will make slight increases. 17% of respondents say they expect to maintain current risk levels and 1% say they will decrease them dramatically.
The changing risk levels reflect respondents’ views on their funds’ allocation to overseas fixed income markets. When asked to assess the credit/fixed income allocation of the funds they manage in terms of their local country market, just over a third (36%) of respondents say they have the weighting about right. Meanwhile 8% of investors say they are very overweight; half say they are slightly overweight. 5% believe they are very underweight and 1% say they are slightly underweight.
Looking to the next three years nearly nine out of 10 (88%) respondents say their portfolio will have a more global allocation to fixed income with 35% of those making dramatic increase to overseas markets. Twelve percent of respondents will keep their allocations the same. One-fifth of respondents believe their credit and fixed income investments are ‘very well aligned’ with their funds’ liquidity budgets, while half say they are ‘quite well aligned’. However, just under a quarter (24%) of investors say their credit investments are ‘much more illiquid’ and 6% say they are ‘slightly more illiquid’ than their funds’ budgets.
Khalid Khan, Head of Portfolio Management, Aeon Investments said: ‘Increasing global fixed income allocations maximises diversification across all markets and issuers, and can have a positive influence on the portfolio’s risk return profile. The same is true of incorporating a broad range of asset classes and sectors.’