43% of global institutional investors expect further declines in fixed income performance

Written by Adam Cadle

01/09/2022

Forty-three per cent of global institutional investors expect fixed income performance to deteriorate further over the next 12 months, with 13% expecting a significant decline, a new report published by Aeon Investments has revealed.

The report, which surveyed institutional investors across Denmark, Finland, Germany, Italy, Norway, Sweden, Switzerland, the UK and the US, found that just 28% said they believe performance in the fixed income market will improve.

Almost two-thirds (62%) of respondents said they expect institutional investors in general to reduce their exposure to fixed income during 2022, while 11% expect them to increase it. When asked about allocations, about half (48 %) expect to reduce their exposure by more than 10% this year, with a further 38% anticipating a reduction of up to 10%.

When asked where the funds taken out of fixed income investments are going, half of global institutional investors said they’re being reallocated to commodities. A similar percentage (47%) said the same about real estate, followed by private equity (44%), structured credit (42%) and public equities (38%).

In addition, 84% of respondents said they expect institutional investors will increasingly focus on structured credit because they offer attractive yields when compared to other asset classes. And almost all (95%) agreed the bespoke nature of alternative credit presents a viable option for investors to make a positive social and environmental impact by educating smaller companies in the financing market.

When it comes to alternative credit, more than a fifth (22%) of respondents cited attractive returns and one in five (20%) selected the sector’s growing focus on ESG. Some 13% cited structured credit’s ability to offer attractive diversification benefits as one of their top three reasons.

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