From the firm’s latest UK Portfolio Barometer, the move into fixed income was most evident in conservative portfolios, but similar moves were clear in balanced portfolios as well.
What is less clear is whether this three-month move says more about expectations for fixed income or absolute return over the longer term.
According to Natixis, the beneficiaries of the move were the inflation-linked and global fixed income categories, implying that “advisers anticipate an uptick in inflation likely due to the weakening of sterling.”
"The danger that lurks among the disappointment with absolute return funds year-to-date is that, having been let down, asset allocators might eschew the sector entirely."
This view of inflation has also been strengthened in recent weeks by the election of Donald Trump to the US presidency and expectations of much greater fiscal stimulus from a Trump White House.
The move out of alternative strategies (predominantly absolute return funds) on the other hand, was evident across not only conservative and moderate portfolios, but aggressive ones as well and was likely due, Natixis said, “to disparate and largely disappointing returns within that sector this year”.
As is evident from the graph on the next page, at an aggregate level, the IA Targeted Absolute Return Sector has lagged other parts of the market significantly year-to-date. What it obscures however, is the range of performance within the sector.