Investors pile up in bonds | Financial Times

Featured Sponsor

Store	Link	Sample Product
UK Artful Impressions	Premiere Etsy Store

Hi, I’m Emma Dunkley covering Harriet Agnew this week.

Investors are piling back into bonds following a “cataclysm” period for the asset class.

Bond prices plummeted last year after sharp interest rate hikes in the US. But Treasury yields are now higher than they have been for most of the last decade, providing an attractive income for asset managers.

With the Federal Reserve nearing the end of its tightening cycle, retail and institutional investors are returning to fixed income, as Madison Derbyshire AND Harriet Agnew relationship.

T Rowe Pricewho oversees more than $1 trillion in assets, said bonds are finally “exciting again, for the first time in a long time.”

Sebastien Page, chief investment officer of global multi-asset strategy at T Rowe Price, said: “It’s very simple: the returns are much higher than they were and it just means you have higher expected returns.”

More than $100 billion was paid into actively managed fixed-income funds in the United States during the first four months of this year, according to data site Morningstar. This follows outflows of more than $332 billion last year.

Investors say the rotation into bonds is sizable. “We are seeing huge moves in fixed income,” said Yie-Hsin Hung, chief executive officer of State Street Global Advisors. “It looks like the beginning stages of what’s happened in the stocks, going much more into the liability.”

It’s not just US investors returning to the asset class. In the UK, retail investors have also flocked to gilts and fixed income products, according to the execution-only platform AJ Bell.

Michael Summersgilthe investment site’s chief executive, said that customers on the platform have increased their investments in UK Government Bonds of a “significant” amount.

“I’ve been here 16 years, I haven’t seen fixed income products and gilts bought in volume like what we’ve seen,” he said.

UK government bond yields, which move inversely to prices, climbed Wednesday to the highest level since former Prime Minister Liz Truss’s “mini” budget after inflation was higher than expected. Gilt yields rallied again on Thursday as traders bet interest rates will peak at 5.5% by the end of the year.

The UK plans changes to pensions to boost business

Pension fund reform is on the cards in the UK as the government attempts to free up billions of pounds to support domestic businesses.

Ministers are considering plans to reform the backed government Pension Protection Fund so that it can take over the defined benefit pension plans of struggling companies, as well as schemes where the employer goes bankrupt.

The objective of the proposals, which are being examined by the chancellery Jeremy Huntis to free up billions of pounds held in defined benefit schemes that can be channeled into UK start-ups and fast-growing businesses.

Steve Webbconsulting partner LCP extensionhe said that if troubled schemes could be transferred to the PPF without first going bankrupt, it could lead to the transfer of “tens of billions of assets”.

AS Josephine Cumbo, George ParkerAND Chris Flood report, the initiative is part of a range that the government is considering to support investment in UK businesses.

Pension reform has come under the spotlight as a search for Ondra Partners shows that holdings of UK listed companies by UK pension and insurance funds have plummeted from around half of their portfolios to 4% over the past two decades.

THE Tony Blair Institutea think tank, he suggested pooling thousands of public and private sector pension plans in giant ‘GB superfunds’ of up to £500bn, as another way to free up billions of pounds for UK business growth.

The proposals come as a number of companies have shunned the London Stock Exchange in favor of New York, due to a variety of factors, from potentially higher valuations in the US to bigger executive paychecks.

Analysis of Patrick Mathurin AND Anne-Sylvaine Chassany shows that London is the European stock exchange most at risk of losing large quotations to the United States.

The FT looked at 111 European companies, each with a market capitalization of at least $10 billion and each with their shares trading at a discount to their U.S. rivals, to see which groups have the most compelling reasons for moving to New York. London-listed groups accounted for half of the top 10 and 18 of the top 50.

London listed Irish construction group CRH extension, which will submit to shareholders its decision to move its primary listing to New York on June 8, topped the chart. It is followed by the cigarette manufacturer British American Tobacco and pharmacist GSK extension. Dutch group of medical devices Philips ranks fifth.

Chart of the week

Shares in the largest in the world semiconductor manufacturers have risen After by Nvidia outstanding earnings. THE Philadelphia Semiconductor Index this week it rose to its highest level in 14 months, he writes George Steer in London.

Nvidia’s market value jumped more than $184 billion this week to nearly $1 trillion after it forecast $11 billion in sales over the next three months, nearly $4 billion higher than consensus expectations. “This is the largest increase we’ve seen in our coverage,” said analysts at Bank of America.

Companies like AMD, Marvell Technology AND Applied materials once again this year they have increased dramatically, by approximately 95%, 70% and 40% respectively.

“Nvidia is the undisputed leader, but two-thirds of [the Philadelphia Semiconductor Index’s] components are outperforming the S&P 500 year-to-date and more than a third are up three times the S&P 500,” noted analysts at Tailored investment group in New York.

There is “insatiated demand” across various industries for Nvidia’s latest H100 data center chips, he said Abhinav Davuluriequity strategist at Morning Star.

However, Marco Haefelechief investment officer at UBS Global Wealth Managementhe warned that the rally in AI-related companies in particular “has raised concerns that this segment is now in a bubble.”

Five must-see stories this week

Peter Brigerco-founder of Fortress Investment Groupbelieves that a sharp credit crunch caused by the banking crisis and rising interest rates will fuel a wave of defaults. This will create the best opportunity for distressed asset investors since 2008, she said.

Kensington and Chelsea council the pension fund is paying hundreds of millions of pounds in commercial real estate in a controversial bet, just as many global pension funds dump or devalue their real estate holdings.

by GAM senior fund managers made a rare intervention of publicly support the proposed sale of the Swiss group to companies listed in the United Kingdom Lion Trust. In an open letter to GAM’s board, the Swiss firm’s fund managers said there was a “cultural alignment between GAM and Liontrust.”

Hargreave Lansdownthe UK’s largest execution-only investment site, has sounded the alarm Lindsell Train’s risk management. Hargreaves warned the fund group was not evaluating its investment decisions “sufficiently” and found deficiencies in “capabilities and resources”.

Investment advisors are job hopping in the United States, triggered by a series of mergers and the recent banking turmoil. More than 26,000 consultants switched companies in 2022, according to Cerulli Associates, representing 9.2% of the US total. Industry executives say they expect the number to grow this year.

And finally

Iraqi artist Give al-Azzawi presents his work to Ashmolean Museum in Oxford. His art includes vibrant canvases and “dafatir”, a combination of paint and text, among other forms. The exhibition is open until 11 June.

---