Speaking at an Australian Institute of Superannuation Trustees luncheon in Sydney yesterday, Mr Chin said investors are not taking into account the additional risk that accompanies assets like floating rate notes or hybrids.
"We would not view fixed income as being the place to try and add alpha, or the place to try and generate returns," he said.
"There are two ways of generating returns in fixed income. You can either go up duration or you can go down the credit spectrum – and that's fundamentally the [whole] story," said Mr Chin.
When investors go "outside of those two dimensions", they add additional risk to their portfolio, he said.
"There’s a famous singer by the name of Waylon Jennings who wrote the song, 'Looking for Love in all the Wrong Places'. Well, let me tell you that in financial markets people are looking for yield in all the wrong places," said Mr Chin.
Assets like floating rate notes or hybrids (on the retail side) do not act defensively in times of stress, he said.
"We have seen time and again the correlations end up being a lot more equity-like in times of stress," said Mr Chin.
"We would say don’t overcook those sorts of exposures in your portfolios."
