In Search of Yield and Safety
Bond funds are becoming more attractive as investors search for yield and ways to protect their investments, while other world asset markets head south.
Around U$478 billion has been put into fixed income funds so far this year, compared with just US$148 billion in the first half of 2018 according to figures from analysts Morningstar quoted in the Financial Times – the highest level of inflows into bond funds in almost a decade.
It is little wonder investors are looking for safety and yield given the state of the global economy at present. The ongoing US-China trade war, Hong Kong protests, Brexit uncertainty and slowing economic growth are all having a big impact worldwide. Of particular concern in Europe is the weakening of the German and UK economies after posting declines in GDP last quarter. One more quarter of contraction and two key European economies are officially in recession.
Markets have reacted with sharp falls, as the FTSE 100, Eurostoxx 50 and Dow Jones all dropped on Monday. The increasingly violent protests in Hong Kong against plans to implement an extradition law which could have seen Hong Kong citizens – and even individuals transiting through Hong Kong – arrested and extradited to China on charges, have also affected markets.
Brexit is also continuing to create uncertainty, evidenced by the continued weakness in Sterling post the insistence of the UK’s new Prime Minister Boris Johnson that the UK will leave the EU on October 31 whether there is a deal in place or not.
Investors are looking for ways to mitigate the impact of volatility and uncertainty on their portfolios, and the potential downturn that many now feel is firmly on the horizon. There has been next to no progress between the US and China in ending the tit-for-tat trade war, in fact President Trump plans to add another 10% tariff on around US$300 billion of Chinese goods coming into the US from September 1. , some of which have now been delayed, causing another wave of volatility to hit the markets. With the continued uncertainty associated with the world’s two largest economies’ trade war showing no signs of abating, a continued migration away from risk assets seem inevitable.
As such, a transition into bond and income funds would seem to be an investment theme that will be with us for some time to come.
Blackheath Capital is raising funds for its own Dublin-based Global Income Fund, and anyone who is interested in finding out more about the fund or providing seed capital at this time can get in touch with us on +44 (0) 20 3880 6640 or by email on info@blackheathcapital.com.
Likewise, any other company looking for expertise or regulatory oversight in relation to their own launch or other investment business, kindly contacts Blackheath via the above contact details.
