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Pension funds/institutional investors plan to reduce exposure to fixed income assets - pessimistic about future performance

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 – some 13% expect a significant decline.

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 – some 13% expect a significant decline. Just 28% believe performance in the fixed income market will improve.

This is according to new research from Aeon Investments, the London based credit-focused investment company, which commissioned research with pension funds and other institutional investors in Europe and the US who collectively have around $574 billion in assets under management.

Aeon Investment’s 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%.

Oumar Diallo, Chief Executive Officer, Aeon Investments said: “The fixed income market has endured a difficult time, and the current macro-environment points to continued struggles for large parts of the market.

“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.”

Next Finance , June 20

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