Perception A: Allocations to fixed income increase as yields rise

Perception A: Allocations to fixed income increase as yields rise

25 oktober 2023

Asset Allocatie Obligaties
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Significant rises in interest rates over the past year has driven 72% of institutional investors and wealth managers to increase allocations to fixed income assets, with just under a fifth (19%) making dramatic increases. 18% say they have kept allocations the same, while 10% have made decreases.

This is according to new research from Managing Partners Group (MPG), the international asset management company, which surveyed institutional investors and wealth managers worldwide with assets of €245 billion under management*.

Nine out of ten respondents expect the yields on fixed income instruments to continue to rise over the next six months, with 21% expecting dramatic increases while 69% say rises will be slight. Nine percent of investors and wealth managers expect rates to stay the same, while one percent predict a slight decrease.

Looking to the next 12 months, just over a quarter (26%) of investors and wealth managers expect yields to rise dramatically, while 60% say increases will be slight. 13% predict yields to remain the same while one percent forecast slight deceases.

To capitalise on the extra returns available from fixed income, just under a quarter (24%) of institutional investors and wealth managers say they will increase allocations to the asset class dramatically, 62% say they will make slight increases. Thirteen percent plan to keep allocations the same and just one percent plan to slightly decrease their investment in fixed income.

Exemplifying the positive investing environment for the sector, MPG’s Melius Fixed Income Fund which invests in corporate, high yield and inflation linked bonds predominantly in the USA, UK, Europe and Switzerland, has returned 7.04% in the 12 months to July 2023 outperforming the iShares Core US Aggregate Bond benchmark by 10.78% over the period. Melius has a yield driven investment strategy that carries less pricing sensitivity to interest rate movements.

Jeremy Leach, Chief Executive Officer at MPG, said: “Interest rates have reached their highest levels for 15 years presenting investors with a clear opportunity to make a real, positive difference to their portfolios by investing in fixed income funds. Now that central banks have reigned in their forecasts on further interest rate rises, it makes sense for investors to increase their allocations to the asset class.'

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