Higher than usual market volatility should cause investors with high equity weightings to consider whether the allocation is justified, according to BlackRock’s head of fixed income.
“I can see retirees increasingly looking for income-based products, which will substantially be of a fixed-income character,” Steve Miller said.
“It will become a more common investment class for a number of reasons. Australia has traditionally had high equity weightings in their portfolios so you’ve got to ask yourself if that’s valid or justified. We’re not going to want volatile, riskier, growth-type exposure.”
Miller said another reason for the attraction to fixed income is its negative correlation to risk assets as Australian investors are becoming more conscious of how to essentially construct their overall portfolio.
“There’s a compelling case for bonds to act as an anchor while still acknowledging that term deposits will fill that gap at least for some people,” he said.
Miller said as portfolio weightings will look significantly different in the next few years, investment managers such as BlackRock need to be more proactive in the education and explanation of the fixed income asset class to investors.
“We as an industry have perhaps been a little remiss in attending to that education task in times gone past,” he said.
BlackRock today launched its Global Screened Government Bond Fund for Australian institutions. The fund may be opened up to retail investors if demand is substantial.
