PGIM: 58% of allocators intending to increase bond exposure in 2024

Half of all allocators plan to boost green bond positions, while 43% intend to allocate towards sovereign debt

Matt Shafer, head of international distribution at BNY Mellon


Asset allocators in Europe and Asia have revealed strong expected demand for fixed income over the next year, according to a PGIM Investments study.

The PGIM Gatekeeper Pulse study canvasses allocation plans of 210 UK, European and Asian allocators at large global financial institutions, all of which have at least $1bn assets under management (AUM).

Some 58% of respondents indicated they intend to increase bond allocations, while just 7% plan to decrease.

Meanwhile, 17% are planning to increase private equity allocation, with 14% for listed equities.

Within fixed income, half of all allocators plan to boost green bond positions, while 43% intend to allocate towards sovereign debt.

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Pessimism over global economy prospects

Among other findings, the majority of allocators are ‘slightly pessimistic’ about the prospects of the global economy and risk assets over the coming year, according to the study.

Most respondents are anticipating increased volatility in equity markets, though more than a third of fund selectors predict global growth will accelerate.

The study also found that fund selectors predict uncertainty due to unresolved economic issues, with diverging expectations for growth, inflation and monetary policy.

Matt Shafer (pictured), head of international distribution at PGIM Investments, said: “The revival of fixed income is undeniable and demand for the asset class continues to gather pace with our investors. While interest rates have spent more than a decade at ultra-low levels, our investment team at PGIM Fixed Income expects developed market rates to experience a sustained period hovering within the traditional long-term range of 3% to 5%.

“Should this materialise, the team expects investment-grade returns in the mid-single digits for the foreseeable future, with high-single-digit returns for higher-risk sectors.”

“With the majority of rate hikes now in the rear-view mirror, we could also see reduced fixed income volatility and a re-emergence of the ‘search for yield’ — which can provide an additional performance boost for bond strategies.”

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