Two thirds of UK pension professionals plan to increase fixed income exposure, Aquila research shows

More than half (53%) of respondents reject the notion there is a ‘great rotation’ from bonds to equities, according to Aquila Capital.

Nearly two out of three (65%) of UK pension fund professionals say they will retain or increase their current exposure to fixed income over the next three years despite uncertainty about the prospects for the asset class, according to new research by independent alternative asset managers Aquila Capital.

The research shows 34% of pension fund professionals plan to increase moderately their exposure to fixed income and 31% intend to retain it at current levels over the next three years. Only 26% say they are likely to decrease it, with 20% intending to do so moderately.

The majority (53%) of respondents reject the idea that a ‘great rotation’ of investor capital from bonds to equities is taking place, with less than one in six investors (15%) seeing a rotation and 32% uncertain.

This stability in overall exposure to fixed income exists despite two thirds (66%) of respondents regarding the asset class as ‘challenging’ or ‘very challenging’.

Key challenges cited by respondents with exposure to fixed income as ‘important’ and ‘very important’ include: rising interest rates (79%); assessing credit quality (74%); low yields (72%); the threat of inflation (72%); and achieving sufficient diversification (70%).

Stuart MacDonald, managing director at Aquila Capital, commented: “As our research shows, UK pension funds do feel challenged by the fixed income market, especially by the prospect of interest rate rises. Yet most of them plan to retain or even increase their exposure to it.. We launched the AC Risk Parity Bond Fund to offer long term, stable returns irrespective of market conditions, which should appeal to a wide range of conservative investors.”

Earlier this month Aquila announced the launch of the AC – Risk Parity Bond Fund, a risk parity strategy to focus solely on fixed income.


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