The broad global attitude domestic investors apply toward their fixed income investments is giving them the advantage of economic diversification, according to the head of the asset class at a prominent global fund manager.
Aberdeen Asset Management head of global credit US active fixed income Timothy Vile said the adoption of core plus fixed income strategies in Australia differs from those used in the US, as they tend to exhibit a greater emphasis on the international component included in the approach.
“The US market has taken more of a US centric kind of approach. Investors there are happy to have a manager look a little bit beyond the US, but still want 70 per cent of bonds to be US,” he said.
“Here it seems like you’re going to have a small piece of Aussie core and then more global bonds, more currency, and bigger allocations to the other areas,” Vile explained.
Vile feels the approach being used in the US is limiting the amount of diversification that can be incorporated in portfolios constructed by investors in that market.
“They’re missing out on the diversification of the economic and business cycles. You could look at it and say I don’t get anymore spreads by going into European corporates than I do by going into US corporates, but what you would get is diversification of the economic cycle,” Vile said.
He believes some institutional investors in the US are beginning to incorporate a greater international outlook in their fixed income allocation, but does not think this attitude will filter through to retail investors until the returns being delivered by some of the other asset classes begin to taper off.
