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Fixed income market is becoming more attractive, pro investors say


New research from Managing Partners Group (MPG), an international fund management group, shows professional investors believe fixed income is becoming more attractive than equities over the next 12 months. This supports anecdotal evidence gathered by The Armchair Trader in the family office sector in the last four weeks.

Almost all (94%) questioned in the global study with institutional investors and wealth managers holding assets of €107 billion under management say fixed income is more attractive with 17% saying it is becoming significantly more attractive.

The research by MPG, which runs the Melius Fixed Income Fund, found growing worries about a global recession and increased volatility in the equity markets plus increased correlation between bonds and risk assets is driving the shift in views.

Managing Partners Group commissioned the market research company Pureprofile to interview 100 investment professionals working for pension funds, insurance asset managers, family offices, other institutional investors and wealth managers with a total of €107 billion assets under management in the UK, US, Germany, Switzerland, UAE, Singapore and Hong Kong during January 2024.

US investment grade and European investment grade fixed income assets are likely to be the biggest beneficiaries of institutional investors and wealth managers increasing their exposure to fixed income but all asset classes will benefit, fund manager MPG says.

Still a possibility of a bond rally?

Professional investors still believe there is a possibility of a bond rally if major economies slip into recession. Around 20% believe a bond rally is very likely in the next 12 months rising to 42% saying a bond rally is very likely over the next 24 months. Around 79% think a bond rally is quite likely in the next 12 months while 57% believe it is quite likely over the next 24 months.

Jeremy Leach, Chief Executive Officer at MPG, said: “Fixed income assets are moving up the investment agenda with investors increasingly expecting continued volatility in the equity markets. In addition there is growing evidence that bonds are becoming more correlated with risky assets including equities. However, if major economies do slide into recession that will increase the likelihood of a bond rally if not in the next 12 months, then in the next 24 months.”

MPG’s Melius Fixed Income Fund has returned 7.72% in the 12 months to January 2024 outperforming the iShares Core US Aggregate Bond benchmark by 5.39% over the period, benefiting from an exposure to fixed income in the USA, UK, Europe and Switzerland. Melius has a yield driven investment strategy that carries less pricing sensitivity to interest rate movements.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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