Aeon Investments: Institutional investors will focus more on active fixed income strategies

Aeon Investments: Institutional investors will focus more on active fixed income strategies

January 16, 2024

Fixed Income
Obligaties (03)

Volatile markets will drive 94% of global institutional investors and wealth managers to increase investment in active fixed income funds over the next two years as they seek to manage risk and drive returns.

New global research from Aeon Investments, the London-based credit-focused investment company, with pension funds, insurance asset managers, family offices and wealth managers who collectively manage around $544 billion, finds 17% of respondents invest under 10% of their total portfolio in active fixed income strategies; 29% invest between 10 and 25%; 34% invest between a quarter and half their portfolio in active strategies; while 20% invest between 50% and 75%.

The research reveals these allocations will increase dramatically for 13% of investment portfolios; slightly for 81%; while 6% will stay the same. 

In terms of current return expectations, 4% say they look for 3% or less from their fixed income allocations; 55% target 3-5%; more than a third (36%) aim for 5-7%; while 5% expect between 7% and 10%.

Nearly all (99%) respondents say that fixed income investors are increasingly willing to pay a liquidity premium for a higher yield and greater diversification. Almost three-quarters (74%) of investors say this trend to more illiquid investments will increase slightly over the next two years; 16% expect dramatic increases while one in 10 respondents say the trend will stay the same.

Current market conditions are also driving institutional investors to look for fund managers that have a broader mandate which enables them to invest in several credit markets. More than half (56%) of investors strongly agree with this view while 44% slightly agree.

Given the growing attractiveness of credit opportunities in private markets, almost one-quarter (24%) of respondents say allocations from institutional investors will increase dramatically over the next three years; two thirds (67%) believe they will increase slightly; while 8% say they will stay the same.

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