Investors Abandon Bond Funds for Absolute Return and Property

Investors are losing confidence in bonds as safe haven assets, selling out of bond funds in favour of absolute return strategies and commercial property funds

Emma Wall 29 July, 2015 | 10:49AM

Investors are dumping bond funds like never before – selling up their fixed income allocation in favour of Absolute Return funds and commercial property investments. Corporate bond funds recorded the worst quarter on record for the three months to the end of June, with outflows of £536 million. May this year saw investors sell £220 million worth of corporate bond funds – significantly more than previous lows in June 2006 and March 2011.

Fund flows by Investment Association sector displayed a similar story, with the strategic bond sector recording outflows of £2.6 billion in the second quarter – the largest outflows on record. April, May and June each separately topped the worst previous months on record, with June seeing outflows of £1.3 billion.

The worst hit fund for the quarter was M&G Optimal Income which saw staggering outflows of £2.3 billion. The fund is rated Silver by Morningstar analysts. M&G Global Dividend was third on the outflows list, losing £923 million under management.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Invesco Global Tgtd Rets UK Acc56.85 GBP-0.28
M&G Global Dividend GBP A Acc244.46 GBP1.09
M&G Optimal Income GBP A Acc195.88 GBP-0.07
SLI Global Absolute Ret Strat Ret Acc74.72 GBP0.28

About Author

Emma Wall  is former Senior International Editor for Morningstar

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