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Fund selectors are increasingly turning to active fixed income managers as interest rate uncertainty persists, with the Bank of England’s latest decision underlining the finely balanced outlook for monetary policy. Research* from Rathbones, one of the UK’s leading wealth and asset management groups, found 81% expect active managers to play a larger role over the next two years. Respondents pointed to the need for greater flexibility across duration and credit quality as portfolios contend with shifting central bank policy and inflation pressures.
This is reflected in the importance fund selectors place on duration management, with 27% saying it is essential and more than two-thirds (69%) saying it is very important.
The survey of 100 IFAs, discretionary fund managers and private banker fund selectors, with collective assets under management of £234 billion, found that 94% view strategic bond mandates that can pivot between government, investment grade and high yield debt as attractive.
Bryn Jones, Head of Fixed Income, Rathbones Asset Management, said: “Fund selectors clearly recognise that, in the current environment, active management has an important role to play in bond portfolios. With the path of rates and inflation still uncertain, the ability to actively adjust duration and credit exposure is becoming an increasingly important part of portfolio construction. This is not simply about seeking income, but about being selective, managing downside risk and identifying where compensation is attractive. These findings underline the value investors place on flexibility and specialist expertise when navigating changing market conditions.”
The study also found that more than nine in 10 (91%) participants agree active credit managers are better placed to avoid asymmetric downside risk in the current narrow spread environment. Separately, 96% value the ability to hedge currency exposure within a global bond allocation.
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