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Pension funds, others worry over future performance of fixed income market

16 Jun 2022, 03:58 pm
Financial Nigeria
Pension funds, others worry over future performance of fixed income market

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Many are planning to reduce their fixed income exposure.

A view of Wall Street skyline

Global bond markets have suffered significant losses in recent months, and with rising inflation and interest rates expected to increase, 43% of pension funds and other institutional investors expect performance to deteriorate further over the next 12 months.

This is according to a new research report sent to Financial Nigeria today from Aeon Investments, the London-based, credit-focused investment company. The company commissioned the study with pension funds and other institutional investors in Europe and the US who collectively have around $574 billion in assets under management (AUM).

The findings of the research include that some 13% of the institutional investors polled expect a “significant decline” in the performance of the fixed income market. Just 28% believe performance in the market will improve.

Aeon Investments’ research found that 62% of those surveyed expect institutional investors to reduce their exposure to fixed income during 2022, and just 11% expect them to increase it. When asked about the institutions they work for, 48% expect them to reduce their exposure by over 10% this year, with a further 38% anticipating a reduction of up to 10%.

“The fixed income market has endured a difficult time, and the current macro-environment points to continued struggles for large parts of the market,” said Oumar Diallo, Chief Executive Officer, Aeon Investments. “Many investors are reallocating to other asset classes, especially those that provide a degree of hedging against inflation such as commodities, and others that provide an attractive higher yield but in a relative low-risk environment such as structured credit.”

Aeon Investments commissioned the market research company Pureprofile to interview 100 institutional investors across the UK, USA, Germany, Italy, Norway, Denmark, Finland, Sweden, and Switzerland. The survey was conducted online in May 2022.

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