Posted inAbsolute ReturnFixed Income

Finns choose absolute return to diversify

Similarly to some other European countries, absolute return is ‘a theme in Finland’, as one fund selector put it. 53% of respondents will increase their allocation during the next twelve months, up from only 33% in {^image|(width)240|(height)230|(url)/getattachment/Profiles-and-Commentary/EIE-analysis/Finns-go-for-absolute-return-to-diversify/finlandmar2014_absrtn.jpg.aspx?width=240&height=230|(hspace)10|(originalwidth)310|(align)right|(behavior)hover|(originalheight)299|(sizetourl)True|(alt)finlandmar2014_absrtn.jpg|(mouseoverheight)298|(mouseoverwidth)310|(vspace)10|(tooltip)finlandmar2014_absrtn.jpg^}January.  Some Finnish fund selectors said they don’t really see alternative options to absolute return in reducing interest rate sensitivity while retaining bond exposure.  

Bearish on developed bonds

It seems some Finnish fund selectors are abandoning developed market government and corporate bonds and plan to buy alternative bond products in return. Most fund selectors keep their allocations to developed market credit and government bonds unchanged though, as they are already underweight. But net sentiment on both categories is clearly staying in negative territory.

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While sentiment on developed market government and corporate bonds is outspokenly bearish, prospects for high yield are mixed. While four in ten respondents will increase their weighting in the asset class, a quarter of interviewees is stepping up their allocation, citing the relatively high interest, low correlation with other bond categories and demand from clients as reasons for that.

Next to absolute return strategies, Finnish fund selectors are also planning to step up their buying of emerging market debt funds.

 

Part of the Bonhill Group.