55 per cent of UK professional investors expect more cautious fixed income exposure from institutional clients, according to a recently published survey by Aeon Investments (Aeon).
The results show that UK investors are not optimistic about the fixed income market.
Approximately 80 per cent of respondents stated that they were ‘concerned’ about falling valuations of fixed income assets, with five per cent ‘very concerned’. This trend was also seen in regard to interest rate rises (65 per cent ‘concerned’, 15 per cent ‘very concerned’) and further inflation (55 per cent ‘concerned’, 25 per cent ‘very concerned’).
Central banks tightening policies and poor yields from fixed incomes were also major concerns, with well over half of respondents ‘concerned’ or ‘very concerned’ about the issues.
Looking to the future, 35 per cent of UK institutional investors predict global bond performance to continue to deteriorate over the next year. Only a quarter expect to see improvement.
The study, conducted by market research company Pureprofile in May 2022, interviewed 100 institutional investors from the US and Europe. 20 of these investors were based in the UK.
Khalid Khan, managing director at Aeon, says: “Our new research shows that UK institutional investors remain worried about the fixed income market — so much so that many of them expect further decline and have reduced their exposure. Instead, [they] are reallocating to asset classes that provide a degree of hedging against inflation, such as commodities, and others that provide an attractive higher yield but in a relatively low-risk environment, such as structured credit.”
