- More than 75% of the financial advisors showed their confidence in actively managed fixed income investments to obtain their expected returns.
- Only 36% trust passive investments managed passively.
- 60% of financial advisers agree that active fixed income managers are their best option to take advantage of alpha opportunities in different market cycles.
- 62% of the consultants consider that actively managed fixed income investments are the best option to meet the long-term objectives for fixed income
According to the recent global fixed income confidence survey ( 2018 MFS® Global Fixed Income Sentiment Survey ) commissioned by MFS Investment Management, confidence in actively managed fixed income investments far exceeds confidence in passive investments between the Spanish financial advisors
More than 75% of the financial advisors showed their confidence in actively managed fixed income investments to obtain their expected returns, compared to only 36% who rely on fixed income investments managed passively.
In addition, 60% of financial advisors agree that active fixed income managers are their best option to take advantage of alpha opportunities in different market cycles and 62% of advisers consider that fixed income investments managed in a active are the best option to meet the long-term goals for fixed income.
“Market dynamics are fundamental for fixed income allocations. After a prolonged period of extremely low interest rates in Europe and around the world, financial advisors may be tempted to stop trusting the value of active management, “said Carlos Aparicio , sales director for Spain at MFS Investment. Management.
“The rates are rising, the economic cycle shows signs of maturity and volatility is increasing, so a solid allocation in active fixed income is logical for investors seeking greater risk management after the excellent path of equity since 2009 “
Priorities for active fixed income
Despite optimism about the national and global economy and confidence in fixed income, Spanish financial advisors are cautious about the current economic situation and are concerned about geopolitical instability, the increase in public deficits and the rise in the interest rates.
Taking these concerns into account, financial advisers have turned to fixed income for several reasons: to reduce volatility (74%), to increase portfolio diversification (74%) and to preserve capital (73%).
However, these priorities represent a contradiction in terms of risk for financial advisers. Almost two thirds of the consultants surveyed affirm that they have assumed more risk in the last three years to obtain the necessary profitability in fixed income.
In Spain, almost 40% of the advisors affirm that they expect to increase their allocation to the high-yield market, normally considered to be of greater risk than the general market, in the next three years. This involves prioritizing risk management in fixed income investment products and in the selection of portfolio managers.
“The profitability of the debt market in recent years has forced advisors to reconsider the level of risk they are willing to assume in the credit markets to find acceptable returns,” said Aparicio. “In the face of increasing volatility and interest rates, advisors should carefully consider the risk management approach of each of the investment managers they delegate and ensure that the level of risk assumed is intentional and low. control, “he warned.
Consideration of risk parameters
When selecting investments and fixed income managers, the advisors look for a risk-based approach, which highlights their focus on risk management. Nearly 70% said they attach great importance to long-term risk-adjusted returns. However, advisors may not pay equal attention to all parameters when assessing the ability of their investment managers to manage risk. The Spanish advisors indicated that they focus more on the following: regularity of profitability (62%), profitability with respect to a benchmark index (55%) and the Sharpe ratio (54%). Meanwhile, a smaller number of advisors focuses on absolute risk (28%), relative risk / tracking error / Beta (25%) and portfolio turnover (8%).