Fixed Income Investing - May 2012
At the risk of appearing clichéd, it is fair to say the macroeconomic picture is no oil painting at the moment. A slide back into recession in the UK, ongoing eurozone turmoil and sluggish global growth all continue to weigh on sentiment as the world economy splutters towards recovery.
The net result of this malaise from an investment perspective is uncertainty on global markets and a lack of confidence in many of the sectors and asset classes that have long been portfolio stalwarts for savvy investors.
And so, with a paucity of other viable options and the need for capital preservation most often trumping the desire for growth, many are finding themselves in the traditional ‘flight to quality’ that so often characterises challenging economic times.
Of course, the world-wise advisers reading this understand that in real terms - that is, in terms of real returns - this is counter-intuitive, especially at a time of persistently above-target inflation.
However, in the fixed income sector, itself often considered a safe haven when compared to tumultuous equities markets, there are a range of tools that can be used to offset the corrosive effects of inflation and protect against a volatile, uncertain economic backdrop.
This special report will focus on the pernicious threats in the current market as a result of the macroeconomic travails and the policy levers that are being employed to boost growth, and will analyse the tools available to investors and that are being deployed by fund managers to maximise performance and minimise risk.
IN THIS REPORT
There are a range of instruments that advisers and investors can do to mitigate the deleterious effect of inflation on returns.
Many managers are reducing durations to mitigate against the risks posed by a surge in gilt yields.
For many, strategic bond funds can offer an all-in-one solution that offers diversification and flexibility.
ADVERTORIAL: While there has been welcome relief in the form of a recent drop in inflation, AXA IM says this as only a temporary situation.
ADVERTORIAL: Are global economic prospects improving and what are the current opportunities for bond investors?