\nState Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT), today announced the results of a global survey of institutional investors on how they view the fixed income market and how they are allocating their investments amid the ongoing market volatility.\n<\/p>\n
\nAccording to the survey report, The Future of Fixed Income<\/i>, many investors are adding private credit investments alongside their public fixed income allocations. Additionally, they are showing a growing appetite for new, systematic fixed income strategies to help combat the impact of rising prices. The findings are based on a global survey of 700 pension funds, endowments, foundations and sovereign wealth funds, as well as wealth and asset managers.\n<\/p>\n
\n\u201cOur research confirms that with the dramatic rise in yields, investors are concerned about how to balance risk and return within their portfolios, leading them to look beyond traditional public fixed income investments,\u201d said Gaurav Mallik, chief portfolio strategist for State Street Global Advisors. \u201cNow is the time for institutional investors to be strategic with their allocations, and they are finding increased opportunity to pair private assets with liquid publicly traded exposures. As investors navigate this volatile time, we are well-positioned to help them access these new approaches, meet their key objectives and manage their allocations and flows.\u201d\n<\/p>\n
\nThis year\u2019s findings also reveal that fee pressure and increased transparency are leading investors to embrace index-tracking investments as a way to gain efficient access to attractive sectors. For many investors, allocations are changing and a balanced approach of active and index investments is gaining traction.\n<\/p>\n
\n\u201cInstitutions are embracing active and index fixed income ETFs at an accelerating pace to optimize their portfolio\u2019s asset allocation and liquidity in this challenging market environment,\u201d said Bill Ahmuty, head of the SPDR fixed income group at State Street Global Advisors. \u201cAs the fixed income market has evolved, some of the structural inefficiencies that were historically sources of outperformance have eroded, which has increased demand for index-based investments. However, there are still opportunities for active managers to add value, especially those with deep sector knowledge and credit skills in specific segments of the credit and loan markets.\u201d\n<\/p>\n
New Sources, New Approaches<\/b><\/p>\n
\nAs markets remain volatile and a recession looms, investors are intensifying their consideration of alternative sources of return. This change of approach by investors impacts how traditional sectors are viewed, adds increased liquidity risk into the equation, supports the rise of systematic strategies and may disrupt some longstanding preferences for active approaches. The report found that:\n<\/p>\n
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- \nAs investors respond to the current market and consider their portfolio duration, respondents are especially interested in increasing allocations in bank loans (51%) and inflation-linked bonds (42%) over the next 12 months.\n<\/li>\n
- \nAround one-third of investors (31%) elected to reduce their traditional fixed income allocations in favor of alternatives over the last nine months, and a further 29% plan to do so over the next 12 months. Those seeking returns in alternatives outnumber those going to cash.\n<\/li>\n
- \nWhile only 14% of respondents globally increased their allocations to fixed income in the last nine months, more respondents (19%) say that they are planning to increase allocations over the coming year.\n<\/li>\n
- \nInvestors are showing interest in new, data-driven approaches to fixed income via systematic strategies. More than half (59%) of investors exploring these strategies say they are planning to use them to replace existing active strategies.\n<\/li>\n<\/ul>\n
Indexing Cements Its Place<\/b><\/p>\n
\nIndexing\u2019s ability to capture the full performance potential of even the most complex fixed income exposures, in a highly cost-effective way, means that active management is no longer the default choice for fixed income investors. The survey found that:\n<\/p>\n
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- \nOver one-third (37%) of respondents say that more than 20% of their fixed income portfolio is allocated to index strategies. For larger investors (those with AUM over $10 billion), this figure increases to 57%.\n<\/li>\n
- \n46% of respondents agree that they\u2019re \u201cunder a lot of pressure to make more efficient use of fees\u201d in fixed income.\n<\/li>\n
- \nMore than two-thirds (76%) of respondents are not planning to make meaningful changes to their balance of index and active strategies in the next 12 months. Among those who do expect to make a change, more will meaningfully increase their overall fixed income allocation to index (14%) than to active (10%).\n<\/li>\n
- \nFor survey respondents who plan to increase allocations to inflation-linked bonds, a majority plan to use indexed approaches.\n<\/li>\n<\/ul>\n
ESG Tops the Fixed Income Agenda for Certain Investors<\/b><\/p>\n
\nESG emerged as a top priority for certain institutional investors, overtaking managing the effects of inflation and rising rates. The report found that:\n<\/p>\n
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- \nMore than one-third (39%) of respondents say integrating ESG considerations is the most important priority to address through their fixed income allocations over the next 12 months.\n<\/li>\n
- \nNearly half of investors have integrated ESG factors within high yield corporate credit (47%). Investment-grade credit (44%), emerging market debt, and sovereigns (each 41%) are also making good progress, but securitized debt (27%) continues to pose a challenge.\n<\/li>\n<\/ul>\n
About the Survey<\/b><\/p>\n
\nThe qualitative and quantitative survey was conducted in mid-2022 and was administered by an independent third-party firm not affiliated with State Street Global Advisors. State Street Global Advisors is identified as the study sponsor. A total of 700 global institutional investors responsible for asset-allocation decisions for top pension funds, wealth managers, asset managers, endowments, foundations and sovereign wealth funds participated in the study. For more information, see the full report<\/a>.\n<\/p>\n
About State Street Global Advisors<\/b><\/p>\n
\nFor four decades, State Street Global Advisors has served the world\u2019s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of index and active strategies to create cost-effective solutions. As stewards, we help portfolio companies see that what is fair for people and sustainable for the planet can deliver long-term performance. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world\u2019s fourth-largest asset manager* with US $3.48 trillion\u2020 under our care.\n<\/p>\n
\n*Pensions & Investments Research Center, as of 12\/31\/20.<\/i><\/p>\n
\u2020This figure is presented as June 30, 2022 and includes approximately $66.43 billion of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors,<\/i>, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated.<\/i><\/p>\n
Investing involves risk including the risk of loss of principal.<\/i><\/p>\n
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA\u2019s express written consent.<\/i><\/p>\n
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.<\/i><\/p>\n
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.<\/i><\/p>\n
\n\u00a9 2022 State Street Corporation – All Rights Reserved\n<\/p>\n
\nTracking Number: 4974549.1.1.GBL.RTL
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Expiration date: 1 October 2023\n<\/p>\n<\/p>\n
View source version on businesswire.com: <\/span>https:\/\/www.businesswire.com\/news\/home\/20221004005811\/en\/<\/a><\/span><\/p>\n
\nLuke O\u2018Mahony (EMEA)
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+44 (0) 7759 067 914
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lomahony@statestreet.com<\/a><\/p>\n\nRandall Jensen (North America)
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+1 (929) 244-3768
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rjensen@statestreet.com<\/a><\/p>\n\nKate Cheung (APAC)
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+85 235561103
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Kate.cheung@statestreet.com<\/a><\/p>\n\nDeborah Heindel (SPDR ETFs)
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+1 917 969-924
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dheindel@statestreet.com<\/a><\/p>\nKEYWORDS:<\/b> United States North America New York Massachusetts<\/p>\n
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