Managers need to focus on active fixed income investing

Zenith/fixed-income/

22 June 2017
| By Oksana Patron |
image
image
expand image

Managers should use a range of investment strategies to optimise returns from Australian fixed interest in the current environment, according to Zenith.

The “2017 Australian Fixed Interest Sector Review”, which examined inflation and the changing composition of the Australian bond market, found that Australia was susceptible to inflation contagion from other G7 countries, including the United States.

Zenith’s head of income and multi-asset research, Andrew Yap, said: “A common theme that emerged during the sector review process was the expectation that under the Trump regime, US inflation would increase over the short to medium-term”.

“The consensus was that the Republicans will implement pro-cyclical fiscal policy to stimulate growth; academic research has shown that Australia is susceptible to inflation contagion from other G7 countries, including the United States.”

Zenith said it believed that in a rising inflation environment, there was greater scope to add value from active management and this extended to outright duration positioning, forecasting changes in the shape of yield curve and potentially exploiting anomalies in nominal versus real yields.

Therefore, through active management, the Australian fixed interest peer group was equipped with the tools that would help protect against rising inflation.

As far as the changing composition of the Australian bond market was concerned, it would have two major implications.

“Firstly, Australian fixed interest managers will need to become more proficient in the use of active interest rate strategies, and secondly, it will become more difficult for credit to be the ‘heavy lifter’ of investment returns,” Yap said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

1 month 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months ago

Entireti has unveiled the new name for the AMP financial advice businesses that it acquired last year....

4 weeks ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

2 weeks 5 days ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

1 week 4 days ago

TOP PERFORMING FUNDS