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Alternative Market Briefing

Majority of institutional investors to cut bond exposure in 2021

Thursday, February 04, 2021

Laxman Pai, Opalesque Asia:

New research found that just over half (51%) of institutional investors plan to reduce their exposure to bonds this year. The majority (65%) cited the rising risk of default while 41% anticipate higher inflation.

"Nearly two in three (65%) see default risk rising this year on corporate bonds in developed economies and 16% are 'extremely concerned' that inflation will reduce the real yields on bonds this year, while 48% are 'moderately concerned' and 22% 'somewhat concerned'. Two in five (41%) of investors anticipate higher inflation this year, with 42% see it remaining about the same and 13% see lower inflation," pointed out the research by Managing Partners Group (MPG), the international asset management group.

The research shows that of those planning to switch, 68% of institutional investors plan to redirect their investments into real estate, 55% to hedge funds, 52% to life settlements, 45% to commodities, and 24% to equities. Only one in four (24%) plan to increase their exposure to bonds this year.

Gan Wyndham-Jones, MPG's Head of Investments, said: "The high number of names that have already left the high street shows the current recession is likely to be deeper than many expect. The four-decade bull run in bonds is most likely over now as investors divest from bonds on fears over the double impact of higher default risks and rising inflation."

"Our research also shows that investors want to switch into alternative investments......................

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