Advisers face an uncertain investment world governed by monetary policy and need to help their clients invest their money more safely, Luke Hickmore has said.
The senior investment manager for Aberdeen Asset Management, said like Darwin’s survival of the fittest, only those investors with strong, robust and diversifed portfolios will be able to survive financially in uncertain bond markets.
He said: “Financial survival is imperative in all situations but none more so than when investing on behalf of others. In the current climate, advisers and investors face an uncertain world that has been artificially inflated and is governed more by monetary policy than fundamentals.”
With deflationary pressures and interest rate risk on the cards, it is important for advisers to help clients choose where to be at the right time when it comes to fixed income investment.
According to Mr Hickmore, the growth of strategic bonds over recent years has shown that investors are increasingly looking for the relative safety of an unconstrained investment approach, without the restriction of a benchmark, and the portfolio diversification that strategic bonds can bring.
Chris Iggo, chief investment officer for Axa Investment Managers, agreed the need for careful selection was critical, especially as thanks to the influence of central banks, yields in Europe were grinding lower and more of the market has a negative yield to maturity.
He said: “Our preferences remain for high yield and less liquid fixed-income products where there is still some decent spread. The macro environment is benign, the Federal Reserve is still not sure to raise rates yet and volatility seems to be on the decline again. In normal times we would say ‘just keep on clipping the coupon’, but the coupons today are very skinny.”
Adviser view
Chris Budd, managing director for Bristol-based Ovation Finance, said: “We like strategic bond funds and find them useful as part of an overall investment strategy. This is especially so, given likely interest rate rises and they are a way to manage credit risk.”
