Fund managers do not expect Brexit

Fixed-income fund managers are confident that the UK will not exit the European Union in the next two years, according to the latest Aviva Investors Multi-Manager Survey.

Twenty fixed-income fund managers, managing an overall £2 trillion of assets, were surveyed. They were predominantly based in the UK, and also the US and continental Europe, with a global scope of investments.

All managers stated that they do not expect a British exit as a result of the upcoming referendum. This contrasts to some extent with Aviva Investors' recent survey of equity fund managers, where 20% of those surveyed believed Brexit will happen.

Two thirds of the fixed-income managers surveyed do not expect eurozone interest rates to rise until beyond 2017.

Downbeat

Nor do they see much sign of an upturn in potential returns. The majority do not expect returns of over 3% for corporate or sovereign bonds.

Over two thirds of the managers surveyed expect returns from corporate bonds of 0 to 3%.

Just 10% of those surveyed expect returns of between 4 and 6%, while 15% expect negative returns.

The picture is similar for sovereign bonds - 79% expect returns of 0 to 3% and 15% expect negative returns. The picture for local currency emerging market debt is particularly negative, with 50% of managers anticipating negative returns.

Ian Aylward, head of multi-manager research at Aviva Investors, says: "Fixed-income investors seem downbeat this year. For example, over 80% expect corporate bonds returns to be negative or below 3%, while just over half expect outright negative returns. 60% expect a rate rise in the UK before year end.

"That said, a very rare unanimous response was received - 100% of managers do not expect a Brexit. This is very different from what public opinion polls would suggest."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.