Financial advisers have significantly increased their allocations to fixed income investments in the past 18 months and are likely to increase that further, according to a PIMCO survey.
The survey is conducted every 18 months and the proportion of advisers with more than 20 per cent of client money allocated to fixed income increased from 41 per cent in July 2010 to 56 per cent in December 2011, according to PIMCO's head of global wealth management Peter Dorrian.
Dorrian said this was borne out in PIMCO's fund flows.
"We can measure [advisers' preference for fixed income] through inflows which have been fantastic over the past 12 months," he said.
"Our funds for the retail market have tripled over last 12 to 18 months. Advisers are putting clients into a more conservative asset allocation. We're also being asked to go along to a number of [professional development] days. We've been to a number this year, and the demand for that has shot up hugely in the last year or so."
Overall, 46 per cent of advisers in the survey had increased their fixed income allocation in the past 12 months, while 53 per cent maintained their allocation and only 1 per cent reduced their fixed income exposure.
Additionally, 39 per cent expected to increase their fixed income investments in the near future, 4 per cent expected a decrease and 56 expected to retain the same levels.
"A lot of that is being driven by… investor fatigue, they're tired of the volatility [in the markets] and want to take some of that volatility out of their portfolio," Dorrian said.
The survey included 204 responses from financial advisers all around the country, and only included independent advisers who had the ability to construct their own approved product list.
"We were looking to get a sense of where the firm or adviser has the opportunity to construct model portfolios for clients, rather than banks or larger groups where head office calls the shots," Dorrian said.
The survey also revealed a significant 38 per cent of advisers felt the average 'balanced' portfolio had too little exposure to fixed income, while 58 per cent felt it was about right and 4 per cent thought it was already too high.
"Lots of institutional clients, especially larger industry funds, persist with notion that balanced funds can have a 75 to 80 per cent allocation to equities," Dorrian said.
