The Australian market is not seeing a great rotation from bonds to yields, despite the uptake in the equity market, PIMCO has said.
The investment manager said that due to the current investment environment, advisers are instead stuck with an "incredible dilemma" of where to focus the asset allocations of their clients, PIMCO head of global wealth management Peter Dorrin said.
"We've got cash rates virtually not generating an above inflation return, we've got term deposits that have fallen to lows we've never seen in Australia in my investment lifetime and we've got an Aussie equity market that's looking much more differently priced to 12 to 15 months ago," he said.
PIMCO said that in the retail investment market, individual investors have been much slower to take up fixed income equities in their portfolios.
However, PIMCO said that in the current environment it is important that investors weigh up illiquidity with return when it comes to asset allocation.
"One of the cautionary messages we have at the moment is that in these low rate environments, investors have to be very conscious of the fact that if there is a big headline rate there is a lot more risk," Mr Dorrin said.
"The rate of return you're getting is giving you - in this environment - a very strong indication of the level of risk."
PIMCO head of portfolio management Rob Mead said that the current environment provided investors with an opportunity to rebalance portfolios toward both fixed income and equities.
"We would say a move like this in the market is an opportunity for those who have a balance toward risky assets to adjust that balance," Mr Mead said.
"We wouldn't say it's one or the other, it's just the right balance of both, given your own personal investment horizon."
