If 2011’s performance figures are to be believed, pretty much everyone missed out on government bond fund returns of around 16%.
If fund manager sentiment is anything to go by, then corporate bond funds have outweighed gilts for years.
And if wealth managers are to be believed, investors aren’t particularly getting value for money from either of them.
Confused..?
This is the confusing picture of the fixed income world right now. To put some meat on the bones, according to the latest Investment Management Association stats, sales across all asset classes for the past three months have been dominated by corporate bond funds; for seven of the past ten months either corporate or strategic bond funds have been the asset class of choice.
To put it into an equity/bond context, fixed income funds consistently showed net monthly inflows, as equity funds showed equally consistent outflows, from last summer until the end of the year; so far this year, both sectors have seen net inflows although bond funds still outsold equity funds in January (£671m compared to £68m) and February (£553m/£249m).
The latest survey of wealth managers (produced by the CFA Society of the UK that represents 9,000 investment professionals) suggests that both government and corporate bonds are overvalued.
Nearly 89% of those surveyed said government bonds are overvalued; the equivalent figure for corporate bonds is pushing 50%.
Equities win out
According to the same group of individuals, equities are, if anything, slightly undervalued (68% for emerging markets, 71% for developed).
Using a value-for-money argument, it looks like the better opportunities are in equities; that government bonds are way too expensive; and that corporate bonds are not too far behind.
But then when did a value-for-money argument ever hold sway?
