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Institutional investors and wealth managers expect a rise in corporate credit downgrades, says Tabula research


New research commissioned by fixed income ETF provider Tabula Investment Management Limited (Tabula) reveals that 45 per cent of European institutional investors and wealth managers expect more corporate credit downgrades and defaults over the next nine months. Only 41 per cent expect the fixed income market to stabilise.

One hundred professional investors across the UK, Sweden, Switzerland, Denmark, Norway, Italy, Germany and France were interviewed for the research.

Overall, 84 per cent of professional investors expect flows into fixed income funds to increase, and 76 per cent believe a key reason will be because of increased market volatility and shocks. Some 67 per cent think flows will rise because investors will be looking for income as companies cancel, suspend or cut dividends. Similarly, 63 per cent think flows will increase because on-going strong support from central banks and governments will continue to make bonds attractive for investors, and 43 per cent said ongoing poor returns on cash will further support this trend.

When it comes to emerging market fixed income, 33 per cent of professional investors expect allocations to emerging market debt to increase dramatically this year, and almost half (49 per cent) expect some rise.

“The fundamentals and market dynamics are driving investment in fixed income, however, the persistent innovation that ignited the equity ETF market has been lacking in this sector, which means the large incumbent funds continue to gather assets,” says Tabula CEO, Michael John Lytle.  “However, investors are hungry for new products, and we have been using our many decades of experience in the credit markets to develop better passive exposure, providing precise, practical tools for portfolio construction. For example, our US Enhanced Inflation ETF (TINF) provides unique exposure to both expected and realised inflation in one product.”

Tabula currently offers a range of unique fixed income ETFs.

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