Fixed income managers downbeat on potential returns but do not expect Brexit: multi-manager survey

The latest multi-manager survey of fixed income fund manager managers from Aviva Investors, the global asset management business of Aviva plc (Aviva), has highlighted that the majority of managers do not expect returns of over three per cent for corporate or sovereign bonds but all are confident that the UK will not exit the European Union in the next two years.

Now in its fourth year, the Aviva Investors Multi-Manager Survey asked fund managers - representing more than £2 trillion of assets under management - for their views on the outlook for markets and likely macroeconomic influences for 2016. Respondents were based predominantly in the UK, but with a global investment scope.

Unanimous view that the UK will not exit Europe

All the managers surveyed do not expect Britain to exit the European Union as a result of the upcoming referendum. This contrasts slightly to the recent survey of equity managers, where 20 per cent of those surveyed believe Brexit will happen.

Returns from both corporate and sovereign bonds of between 0-3 per cent expected by majority

Over two thirds of the managers surveyed (68 per cent) expect returns from corporate bonds of between zero and three per cent. Just 10 per cent of those surveyed expect returns of between four and six per cent and 15 per cent expect negative returns. The picture is similar for sovereign bonds – 79 per cent expect returns of 0-3 per cent and 15 per cent expect negative returns. The picture for local currency Emerging Market Debt is particularly negative – with 50 per cent of managers anticipating negative returns.

Lack of liquidty the biggest risk facing corporate bonds

Nearly 50 per cent of respondents see a lack of liquidity as the biggest risk facing corporate bonds. The next biggest concerns are the withdrawal of quantitative easing and low absolute yields – at 15 per cent each. 

Mixed response on the biggest risk facing sovereign bonds

There was a mixed view on the biggest threat to sovereign bonds this year – with rising interest rates (37 per cent of those surveyed), low yields (26 per cent) and the withdrawal of quantitative easing (21 per cent) the key concerns.

Rate rise in the Eurozone not expected until beyond 2017

In the Eurozone, a considerable 63 per cent of the managers surveyed do not expect rates to rise until beyond 2017.

Ian Aylward, Head of Multi-Manager Research at Aviva Investors, said:

“Fixed Income investors seem downbeat this year. For example, over 80 per cent expect corporate bonds returns to be negative or below  per cent whilst just over half expect outright negative returns from Local Currency EMD. Sixty per cent expect a rate rise in the UK before year end. That said, a very rare unanimous response was received - 100 per cent of managers do not expect a Brexit. This is very different to what public opinion polls would suggest.”

- ENDS -

Notes to Editors

The information and opinions contained in this document are for use by the financial press and media only, and do not purport to be full or complete. No reliance may be placed for any purpose on the information or opinions contained in this document nor should they be seen as advice.

The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.  

The press release is provided on the basis that Aviva Investors Global Services Limited is not causing the communication of a financial promotion under exemption of the Financial Promotion Order, as Aviva Investors Global Services Limited has no control over the way in which an article based on this press release is prepared and published by the financial press and media. 

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at 4 January 2015.

Aviva Investors

Aviva Investors is the global asset management business of Aviva plc. The business delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 15 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £267 billion as at 30 September 2015.

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