Further rises in interest rates and inflation are the biggest concerns US pension funds and other US institutional investors have about the fixed income market. This is according to new research (1) from Aeon Investments, the London based credit-focused investment company, which surveyed professional investors in the US who collectively have around billion in assets under management.

Some 95% of survey respondents said they are concerned about further rises in interest rates, with 55% of these saying they are ‘very concerned’. The corresponding figures for inflation are 90% and 55%, and for falling valuations of fixed income assets, the figures are 85% and 45% respectively.

Some 70% of those surveyed said they are concerned about central bank tightening policies (40% are very concerned about this), and 70% said this about poor yields on many traditional fixed income assets (45% are very concerned about this).

As a result of these concerns, 35% of US pension funds and other institutional investors surveyed expect global bond performance to deteriorate further over the next 12 months – some 25% expect a significant decline. Just 25% believe global bond performance to improve over the next 12 months.

Aeon Investment’s research found that 70% of those US professional investors interviewed expect institutional investors to reduce their exposure to fixed income during rest of 2022, and just 15% expect them to increase it. When asked about the institutions they work for, 25% expect them to reduce their exposure by over 15% this year, with a further 30% anticipating a reduction of up to 10%.