The contracting of fixed income funds reaches a maximum of 20 years with rising rates


Fixed income investment funds until October registered net subscriptions worth 12,752 million euros, which represents its highest level in the last twenty years, despite the fact that the profitability of this type of asset has plummeted during the year. The Association of Collective Investment Institutions and Pension Funds, Inverco, explained in its last report in October that the environment of high uncertainty generated by the interest rate increases carried out by central banks, “is generating expectations of opportunities in the participants investment in fixed income categories”.

The net deposits of money (subscriptions minus redemptions) of this type of investment instrument in the first ten months of the year added more than what was captured in any of the complete exercises of the last twenty years. In addition, they exceeded the total money raised by the set of all investment funds between January and October, which reached 12,599 million.

And this evolution occurred at a time when the profitability of fixed-income funds fell by around 20% since the beginning of the year. The experts explain that it had been decades since fixed income had not behaved so negatively and at the same time as equities. The significant rises in interest rates carried out by central banks to control high inflation have caused a sharp rise in bond yields which, in turn, has implied price falls for fixed-income securities.

In this context, sources from the National Securities Market Commission (CNMV) explain that to date fixed-income subscriptions are concentrated in low duration fundss, or with strategies to buy and hold the portfolio to maturity, or are subscriptions associated with discretionary portfolio management mandates.

However, they warn that the entry of retail investors into said fixed-income funds, produced in a context of expectations of interest rate increases, “makes it necessary to emphasize the importance of proper marketing of such funds, so that their investors (with a conservative profile) know the risk of loss due to increases in interest rates”.

Optimism for the future

“In short, that they are aware of the maxim that fixed income is not fixed,” says the CNMV. Despite the historical falls recorded by fixed income during the year, experts They already see reasons to be somewhat more optimistic for the future. Oliver Eichmann, head of debt and fixed income for Europe, the Middle East and Africa (EMEA) at DWS, says that fixed income is finally generating income again, while the asset management firm of the Allianz insurer, Allianz Global Investors (Alianz GI), is committed to investing in the sovereign bond market against the stock markets.

Also, the managers of Bank of America anticipate that the yields of the bonds will fall in the next twelve months, something that, if fulfilled, would lead to price increases. In this sense, Bank of America sees a “very remarkable milestone” that for the first time since it carried out the aforementioned survey among its managers (2003), the results of the study predict a positive year for fixed income.

Likewise, 42% of respondents expect bond yields to fall, and the price to rise, compared to 40% who expect yields to rise. For its part, the JP Morgan manager sees it possible that “the painful fall” registered in stocks and bonds in 2022 has not yet ended, but in the long term, it observes that this year’s turmoil is creating the most investment opportunities. attractive than they have seen in a decade.


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