Wealth managers and other professional investors are planning to lock in gains from strong equity performance and rebalance portfolios to fixed income in anticipation of higher levels of volatility in equity markets.

Research from Managing Partners Group (MPG) found that 91 per cent of professional investors, including wealth managers and family offices, expected equity markets to experience high levels of volatility over the next 18 months.

Nearly all (96 per cent) believed that this volatility would lead to investors increasing their allocation to fixed income.

Less than one in 10 (8 per cent) of professional investors predicted that the level of volatility in equity markets would remain the same as it is currently.

A similar trend was expected be seen amongst pension schemes and other institutional investors, with 88 per cent of professional investors expecting them to lock in their equity gains and rebalance towards fixed income.

Almost all (95 per cent) of institutional investors believed that the market was entering the ‘decade for fixed income’, in the same way that the last decade was the ‘decade for equities’, according to MPG.

With the current and expected market volatility, 95 per cent of those surveyed forecast active bond strategies, such as fixed income bonds, to outperform passive ones in the next five years.

Furthermore, 98 per cent of professional investors felt that high yield credit would outperform US stocks over the next five years, with nearly a third (30 per cent) strongly agreeing with this view.

Commenting on the findings, MPG chief executive officer, Jeremy Leach, said: “With the current and expected market volatility our new research shows a resounding agreement among professional investors to lock in the gains they’ve made from equities and rebalance portfolios to fixed income.

“Their view is so strong that many professional investors believe that the traditional 60 per cent equities, 40 per cent fixed incomes allocation should be dramatically revised to include a much higher proportion in bonds.”

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