European institutions to ramp up domestic fixed income, survey shows
Eighty percent of European institutions (excluding the UK) are planning to increase their exposure to domestic fixed income over the next 12-24 months, according to a survey by Fidelity.
Among UK investors, this figure was even higher, at 87%, while globally, just 64% of respondents said they would be increasing exposure to their country’s bonds.
According to Fidelity’s Global Institutional Investor Survey, illiquid alternatives are also set to increase in more portfolios, with 93% of European institutions and 92% of UK investors planning to invest more in the asset class.
Globally, 72% of respondents said they were keen on illiquids.
Fidelity – when asked about the high preference for domestic fixed income*, particularly in the UK and the rest of Europe – said these investors were focusing more on portfolio preservation than growth.
“Both of those regions cited volatility as their top concern, likely driving interest toward fixed income,” it said.
The asset manager also cited European institutions’ return expectations.
“Surprisingly, both Europe and the UK expect domestic fixed income to outperform domestic equity – by around 75 basis points and 100bps, respectively,” it said.
In the previous survey four years ago, only 14% of European institutions wanted to increase their exposure to domestic equities, while in the UK the figure came to 38%.
Illiquid alternatives were also less popular, with only around 45% of respondents showing increased interest in the asset class.
This year, none of the surveyed UK and other European institutions wants to reduce exposure to illiquid alternatives.
The only other asset class none of the investors in the two regions wants to reduce is cash, which is expected to be increased in around 70% of portfolios in UK and the rest of Europe, Fidelity said.
*The original version of the article referred to a preference for domestic equities.