The vast majority (88 per cent) of institutional investors have reduced their allocations to fixed income over the past 18 months, according to a survey by Aeon Investments Ltd.
The survey, which was based on responses from institutional investors in Europe and the U.S. with a total of US$436.5 billion in assets under management, found more than half (51 per cent) of those that reduced allocations to traditional fixed income assets did so by between 10 and 15 per cent. Almost a quarter (23 per cent) reported cutting these allocations by up to 10 per cent during the period, while 14 per cent) decreased them by more than 15 per cent. Just 12 per cent said they increased allocations to fixed income during the period.
Among respondents that reduced fixed income allocations, more than half (57 per cent) said they reallocated assets to private equity, 49 per cent reallocated to commodities and 38 per cent reallocated to real estate. More than a third (35 per cent) reported making reallocations to public equities.
“The outlook for fixed income remains mixed with continued inflationary concerns and tightening monetary conditions following a sustained period of emergency stimulus introduced during the pandemic,” said Oumar Diallo, chief executive officer of Aeon Investments, in a press release. “However, with alternative credit offering increasingly attractive risk-adjusted returns, we expect to see further reallocation into this space from traditional fixed income investments over the course of the year.”