- Almost all (99%) institutional investors and wealth managers say investors should have switched from cash to bonds before The Fed started to cut rates in order to avoid missing out on potential returns
- With falling inflation and high interest rates nine out of 10 (91%) professional investors agree investors should allocate more to fixed income than they have historically done, according to MPG’s global study
New research* from international asset management company Managing Partners Group (MPG) reveals that with a record $6.5 trillion sitting in US money market funds, institutional investors and wealth managers predict an unprecedented surge in demand for bonds over the next few years as the US Federal Reserve continues to cut rates – and believe the switch from cash to bonds should have been made before The Fed starts cutting rates in order to avoid missing out on potential returns.
Research among global institutional investors and wealth managers found over half (56%) predict between $2 trillion and $2.5 trillion will leave US money markets and return to the bond market over the next couple of years. Two fifths (40%) think this will be as much as between $2.5 trillion and $3 trillion, and 3% say this will be over $3 trillion. Just 1% say this will be less than $2 trillion.
With this potential surge in demand for bonds so exceptionally high, almost all (99%) institutional investors and wealth managers surveyed said they believe investors should have got ahead of this shift from cash to bonds and switch before the US Federal Reserve started to cut, in order to avoid missing out on the potential returns. Around a quarter (25%) strongly agree with this view.
MPG’s survey of global institutional investors and wealth managers with total assets under management of €136 billion under management found that almost all (96%) agree that with inflation falling and historically high interest rates, investment strategies are looking again to fixed income for stability, diversification and income in portfolios, and at the same time equities are beginning to look expensive. Around two fifths (39%) strongly agree with this view.
Almost all (91%) also agree that in today’s environment, investors should allocate more to fixed income than they have done historically, the study by MPG which runs the Melius Fixed Income Fund found. Just under a fifth (18%) strongly agree with this view.
MPG’s Melius Fixed Income Fund is a regulated mutual fund that aims to achieve an attractive level of growth whilst respecting risk diversification. It currently invests in corporate, high yield bonds and life settlements** and now offers weekly liquidity and dealing frequency, as it continues to outperform its index. Previously the fund offered monthly dealing and had a 90-day notice period. It has delivered returns of 32.17% since launch in late 2019 and 4.77% in the year to date***.
That compares with returns of 1.01% in the year to date for its benchmark the iShares Core US Aggregate Bond index. Outperformance is partly driven by its exposure to fixed income in the USA, UK, Europe and Switzerland. Melius also has a yield driven investment strategy that carries less pricing sensitivity to interest rate movements.
Jeremy Leach, Chief Executive Officer of Managing Partners Group commented: “There is a record amount of money set to return to the bond market over the next few years, and our new research shows that professional investors believe that those who acted before The Fed started cutting rates are the most likely to avoid missing out on potential returns. There is often a pattern of government bond yields falling and prices rising before a major central bank takes action. As we appear to be entering a period of falling inflation and lower interest rates, our research shows a strong appetite for fixed income, as it offers stability, diversification and a regular income stream. MPG’s Melius Fixed Income Fund gives investors the benefits of diversifications as well as offering weekly liquidity and dealing frequency, as it continues to outperform its index.”
MPG is a multi-disciplined investment house that specialises in the creation, management and administration of regulated mutual funds and issuers of asset-backed securities for SMEs, financial institutions, and sophisticated investors. It currently manages two funds with a combined gross value of $500m.
For more information on Melius Fixed Income Fund see: https://www.meliusfund.com
For more information on Managing Partners Group see: www.managingpartnersgroup.com
