Wealth Managers Bullish On Bonds – ARC
Asset Risk Consultants, an international investment consultancy with offices in the UK and the Channel Islands, has released its latest investor sentiment survey.
The latest investor sentiment survey from Asset Risk Consultants shows that the positive sentiment towards bonds is at its highest level for more than a decade after new estimates show that value of the average portfolio fell by 9.8 per cent in 2022
The survey comes after a difficult year for wealth and investment managers as a combination of factors including the war in Ukraine, inflation and slowing global growth triggered falls in the value of most asset classes over 2022.
Multi-asset class portfolios delivered negative returns for the vast majority of private client investors, the firm said in a statement.
With falls in almost all asset classes, the notable exceptions being energy and commodities, there were very few opportunities for investors to avoid losses, ARC continued.
Sharp rises in government bond yields meant that traditional safe-haven assets also failed to provide capital protection.
ARC said that there is evidence that the financial repression of bonds delivering negative real returns may be ending and, with equity market valuations returning towards historical norms, investors can potentially expect to achieve positive real returns once the current level of inflation subsides. Sentiment towards bonds is at its highest since its survey began in 2009, the firm added.
Graham Harrison, chairman at ARC, said: "For the first time in over a decade investors need to be paying close attention to the amount of money they invest in bonds alongside the shares they hold in companies.”
“For more than 10 years investing in bonds has given very little yield or interest income – this has now changed. Bonds are back and, subsequently, so is the traditional balanced portfolio,” he continued.
"It seems likely that investors will face ongoing uncertainty: a resolution to the conflict in Ukraine appears to be remote; geopolitical tensions remain significant; slowing global economic growth may well turn into localised recessions; inflation may well prove stubborn as supply chain disruptions continue and labour shortages remain; and corporate earnings will surely come under severe pressure,” he said.
“However, uncertainty also creates opportunities for discretionary managers and, with equity valuations becoming more attractive and real bond yields improving, there is hope that 2023 will be a better year for investors," he continued.
ARC collects the actual performance of more than 350,000 investment portfolios from more than 140 investment managers. A steady growth portfolio typically has around two-thirds of exposure to equities with the remainder in other asset classes such as bonds.
ARC advises on over $19 billion of assets invested across more than 200 banks and investment firms for clients from over 20 jurisdictions around the world.
This news service recently interviewed ARC about its business strategy and approach to providing more transparent, accurate data showing how well or not wealth managers are doing. See more here.