The Asset: High levels of market volatility offer opportunity

Fund managers can exploit valuation anomalies, mispricing, short-term return catalysts.

Nearly all institutional investors agree that during the current market volatility, active fixed-income fund managers can add value to portfolios, according to a recent survey.

One-quarter of fund managers strongly agree and 74% slightly agree that fund managers can increasingly add value through sector rotation to exploit valuation anomalies, mispricing or market catalysts for short-term returns, finds London-based credit-focused investment company Aeon Investments, which surveyed managers with pension funds, insurance asset managers, family offices and wealth managers that collectively manage around US$544 billion.

The majority of respondents expect these opportunities to increase over the next two years, with 22% saying there will be dramatic increases and 59% predicting slight increases in the chance to add value. However, 19% of investors say the situation will remain the same over the next two years.

Investors also believe there are a growing number of opportunities in the credit and fixed-income market based on the highest conviction ideas, contrarian themes and dislocation opportunities – 14% of respondents say these opportunities will increase dramatically over the next three years, 73% say they will increase slightly, and 13% say they will stay the same.

“Active fixed-income managers clearly have an opportunity to add value in current markets,” says Khalid Khan, Aeon’s head of portfolio management. “It is encouraging to see how many investors recognize the potential from active fixed-income investing, which we have long promoted, as a means to boost alpha and manage risk.”

The Asset

High levels of market volatility offer opportunity

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