The Financial Adviser Fixed Income survey, in association with AXA Investment Managers, targeted a range of advisers and intermediaries* to explore their views on the asset class, how they were using fixed income in their clients’ portfolios and what the outlook was against an uncertain economic and political backdrop.
The overall results were perhaps unsurprising in a low-rate environment, with respondents demonstrating a continued recognition of the benefits of fixed income exposure, particularly for those clients seeking an income but not prepared to take on undue risk.
Indeed, when asked how likely they were to recommend a bond fund over the next 12 months, 51.4 per cent stated they were “very likely” to, with a further 35.8 per cent saying they were “potentially likely” to.
“The results were in line with what we have experienced at AXA Investment Managers”, says Nicolas Trindade, fund manager of the AXA Sterling Credit Short Duration Bond fund.
“We have continued to see clients seeking fixed income and, specifically, looking for some exposure to high yield, which was clearly demonstrated in the survey.
"It makes sense in the current low yield environment, where advisers are having to work hard to find sources of income. There has also been some more focus on short duration funds, including investment grade ones as a step-up from cash, as market expectation is for yields to rise globally.”
Interestingly, when asked about the key drivers behind their recommendation in a bond investment, there was a focus on the track record of the fund manager (44.9 per cent) and the reputation of the fund house (19.3 per cent), as well as the underlying strategy and holdings.
There was also a real interest in third-party investment solutions, with 58.2 per cent of respondents answering that they would “prefer to invest in fixed income as part of a multi-asset portfolio for a less sophisticated investor, over a plain bond fund”.
Mr Trindade comments: “When you are an adviser one of the key things is making sure the company you invest with is sound, with proper risk controls in place and a strong background in the area of the market you are looking to invest in.
AXA Investment Managers has a well-deserved reputation in the fixed income space and, specifically, is a respected leader in short duration strategies, which look set to be the dominant theme of 2017.
Indeed, 51.7 per cent of respondents said they were ‘very likely’ to recommend a short duration strategy in the future.
Mr Trindade adds: “In terms of why advisers might opt for a multi-asset fund, one thing is for sure: the global macroeconomic backdrop is much more technical now than it was 10 years ago. We have competing central banks with divergent monetary policies, as well as credit cycles that are not necessarily in tune across the world.
"I have a lot of sympathy for advisers who want to delegate the allocation across regions and across asset classes to one asset manager so they can do it on their behalf.”