Financial Investigator: Perception A: Fixed income allocations are too low

A return to favourable interest rates has reignited appetite for fixed income assets, but current allocations are too low, new research from Aeon Investments, the London-based credit-focused investment company shows.

Its global study with pension funds, insurance asset managers, family offices and wealth managers who collectively manage around $545 billion found more than half (54%) believe allocations to fixed income are insufficient, with 17% saying they are ‘way too low’ and 37% saying they are ‘slightly too low’.

Respondents note the ‘difficult period’ for fixed income in recent years but given the recent return to rising interest rates, the majority predict an increase in allocations to the asset class.

More than three-quarters (78%) say professional investors will increase allocations to investment grade fixed income assets over the next 12 months. More than half (56%) say they will increase investments slightly, while 22% expect dramatic increases.

Some 82% say professional investors will increase allocations to investment grade fixed income assets over the next three years, with 24% believing increases will be dramatic, while 58% predict slight increases.

Respondents also predict increase in allocations to high yield non-investment grade fixed income. Over the next 12 months 48% say there will be slight increases while 28% say increases will be dramatic. There are similar expectations about allocations to high yield and non-investment grade fixed income over the next three years with 48% expecting a slight increase and 24% expecting a dramatic increase.

Financial Investigator

Perception A: Fixed income allocations are too low

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