Investors have allocated too much to fixed-income assets and not enough to equities, ING Investment Management has said.
Valentijn van Nieuwenhuijzen, head of strategy for multi-asset at the firm, said that “once you realise there is not going to be easy money forever” because of the easing of monetary policy, it becomes clear that the returns on fixed-income assets are going to be “modest or even disappointing”.
“There is massive over-allocation in the fixed-income space,” he said, adding that liquidity risk is now higher than previously.
The trend of investors looking for fixed-income assets will only change if the big three economies – the US, Germany and Japan – continue to improve going forward, Mr van Nieuwenhuijzen said.
“I think the likelihood of that is well above 50 per cent,” he said. “But if those economies fall back again, the search for income will come back again.”
Some commentators have suggested that a greater allocation to equity income stocks might be seen as investors begin to look again at equities.
Mr van Nieuwenhuijzen predicted that investors will start shifting towards a cyclical investment approach and away from over-valued defensive sectors.
