Fixed income managers are unprepared for the current rate rise environment, with only 3 per cent of investment managers having complete confidence in fund managers’ abilities to navigate the markets, new research shows.
Research from NN Investment Partners of institutional investment managers shows that the majority think fixed income managers are inexperienced for the upcoming markets, with many not having invested in a rate rise market before.
The research found 54 per cent of respondents think several fixed income managers will struggle when rates start to rise, with 6 per cent saying that they have no confidence at all in current fixed income managers.
Of those that say they have little or no confidence, half said it was due to managers’ lack of experience with investing in the end of a credit cycle, while 17 per cent said experience of rising rates was lacking.
“A Fed tightening cycle, if it comes, may well be very different from earlier cycles, something that few fund managers have experienced. The challenge will be to understand what is going on and to adapt,” says Sylvain de Ruijter, head of global fixed income at NN Investment Partners.
Of the respondents, 80 per cent said fixed income managers would have to adopt a more flexible approach.
“A low-yield environment requires a more active investment approach and this is what we are advising our clients, not only in fixed income but multi-asset as well,” says de Ruijter.
Concerns about fixed income managers’ experience is higher in the high-yield space, where 17 per cent of respondents have little or no confidence in current managers. In addition, 52 per cent think some managers will struggle in the upcoming end of the credit cycle.