Investors are migrating to bonds as part of maintaining a balanced portfolio, according to Equity Trustrees Limited (EQT).
Interest in actively managed fixed income funds has resulted in an increasing level of investment in bonds as part of a diversified portfolio.
“We are seeing money starting to move out of term deposits and other cash deposits, not just into equities but also into bonds,” Equity Trustees’ head of corporate fiduciary and financial services Harvey Kalman said.
“We see three main sources for these substantial inflows: investors getting out of term deposits; a switch from passive to active mangers; and a rebalancing out of model portfolios.”
Inflows into the PIMCO EQT retail bond funds increased by over one billion in 2012, $820 million of which was net inflows.
The PIMCO EQT Global Bond Fund delivered returns of over 14 per cent last year, and the PIMCO EQT Australian Bond Fund returns 8.6 per cent.
EQT have said that while bond returns may not grow at the same high level in 2013, they provide a way to manage risk in what is likely to remain a volatile domestic market over the next year.
“Chasing income has become almost an obsession for investors in recent years, which is not a healthy long-term investment strategy,” Mr Kalman said.
“Investors need to look for both income and alpha, avoid getting caught up with market runs, and spread their investments across asset classes.”
