New research from international asset management company Managing Partners Group (MPG) shows that professional investors are expecting their organisations’ allocation to fixed income to surge over the next 18 months, after a period of being underweight.
Research among global institutional investors and wealth managers found over half (57%) say their organisation’s current allocation to fixed income is underweight. Around a quarter (26%) say it’s about right and under a fifth (17%) say their organisation’s current allocation to fixed income is overweight.
But this looks set to change as the prospects for fixed income returns are strong, with bond yields at their highest since the financial crisis, the study by MPG which runs the Melius Fixed Income Fund found.
Almost all investors expect to be buying more bonds next year
MPG’s survey of global institutional investors and wealth managers with total assets under management of €136 billion under management found that almost all (99%) see their organisation’s allocation to fixed income increasing over the next 18 months. Around one in 10 (10%) say this will increase by up to 10%, over two thirds (66%) say this will rise by between 10% and 15%, and 23% say it will rise by more than this over the next 18 months.
Jeremy Leach, Chief Executive Officer of Managing Partners Group explained further: “Fixed income funds have seen increasing inflows recently and this new research shows that institutional investors and wealth managers are set to significantly increase allocations over the next 18 months. Particularly as we enter a period of high volatility, the benefits of diversification and a regular income means fixed income is an increasingly popular choice for institutional investors and wealth managers.”
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MPG’s Melius Fixed Income Fund is a regulated mutual fund that aims to achieve an attractive level of growth whilst respecting risk diversification. It currently invests in corporate, high yield bonds and life settlements and now offers weekly liquidity and dealing frequency, as it continues to outperform its index.
Previously the fund offered monthly dealing and had a 90-day notice period. It has delivered returns of 32.17% since launch in late 2019 and 4.77% in the year to date. That compares with returns of 1.01% in the year to date for its benchmark the iShares Core US Aggregate Bond index.
MPG said that the fund’s outperformance is partly driven by its exposure to fixed income in the USA, UK, Europe and Switzerland. Melius also has a yield-driven investment strategy that carries less pricing sensitivity to interest rate movements.
