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Popular fixed income assets for financial advisers

Journalist: Ima Jackson-Obot, FTAdviser

ended 21. February 2023

Hello advisers,

At FTAdviser, we ran a recent poll asking advisers, which of the following fixed income assets they are more likely to increase their allocation to over the next six to 12 months. A quarter of advisers said short duration bonds, followed by government bonds among 21.9 per cent of advisers.

The rest of the result is as follows: strategic bond funds - 18.8%; high yield bonds - 12.5%; emerging market debt - 12.5% and investment grade bonds - 9.4%.

What do you make of the results and what approach are you following?

3 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Good quality emerging market debt is the place to be in 2023. A global recovery will serve this sector well and higher interest rates mean those secure companies will still be paying a premium through fixed interest to cover expansion credit facilities.
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Philip Dragoumis
Director and Owner at Thera Wealth Management
Our approach to fixed income depends on the client, their investment term, objectives and their risk tolerance. We believe in duration matching so clients who are happy with some volatility and are investing long-term in their pensions can be certain of the yields they can achieve and that returns can at least match or beat inflation. Gilts with 10 years duration and global inflation linked bonds help guarantee these returns even though short term as last year has shown the ride can be bumpy. They also protect our portfolios through recessions.

For risk averse clients, short term bonds below 5 years are best but they do have reinvestment risk as interest rates fall. We don't believe in high yield or EM Debt. If the correlations are high with equities why not just take equity risk instead since there is no cap to the upside?
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
"We try to hold as little client money as possible in bonds. Over the long-term we believe that equities are the key driver in growing our clients wealth."