Institutional investors expect an annual 3% yield from fixed income strategies in current markets, according to research by NN Investment Partners.
The research found that 47% of investors believe that current market conditions are challenging for fixed income, with another 12% describing them as very challenging. On their expectations for an annual yield, investors gave responses ranging from less than 1% to 6%. And 42% of investors said that it was difficult for fixed income managers to generate positive performance throughout the interest rate cycle.
NN Investment Partners head of global fixed income, Sylvain de Ruijter, said: “The environment for fixed income investment isn’t easy, but it never is. The challenge is doing it optimally. In the “safe” parts of the fixed income world, returns are indeed very low. Yields on high-quality government bonds in many G-10 countries, for example, are below 1%. But if you move up the risk scale, you see there are also pockets with attractive yields of more than 7%.” De Ruijter added that with interest rates at record lows following a period of slow global growth, investors need to have a defined strategy to manage risks and find the right opportunities.