The reason for this is, unsurprisingly, the fact that 10-year government bond yields have touched new lows after the Brexit referendum. However, the Catalans also realise that if they want yield, they’re going to have to take more credit risk. They are therefore looking to add to their emerging market bond holdings. Four in 10 interviewees plan to increase their allocation, double the share of those intending to cut exposure.
Unconstrained bond funds are also popular, and have made a strong comeback. Back in October last year, only 5% of Barcelona’s investors planned to increase their allocation to the asset class, while four in 10 weren’t even invested. But appetite for unconstrained bond funds, which can invest across the fixed income spectrum, has surged in the meantime. Some 40% of interviewees plan to increase their allocation, while the share of those without any exposure has halved to 20%.
Commodities, or more specifically gold, are also a resurging theme, which can be viewed in the same light as Catalan investors’ preference for short-duration bonds. After all, gold is a risk-off, short-duration investment that would not be negatively affected by rising inflation and/or bond yields.
In autumn last year, Catalan investors were still bearish about the yellow metal. But in the past six months, gold has risen by 15%, and there has been a marked change of mood. About half of interviewees had been buying into gold funds as a satellite holding when markets turned rocky at the start of the year. And they were visibly happy how their bet had worked out when our researcher met them in August.
The other half of interviewees were bemoaning their lost chance as they believe their ‘golden opportunity’ has now passed: most investors who currently have no exposure to commodities have no intent to change that. Investors who engage with the asset class, however, still see opportunities: two fifths of those plan to further increase their allocation. Thus far they have mostly set their sights on gold, but they are showing interest in other commodities too.