Call for increased fixed interest transparency

Fixed income specialist FIIG Securities has called for greater transparency in the interest rate market and more investment diversification from retail investors to help level the playing field in an environment favouring the institutional sector.

FIIG managing director Jim Stening claims that unlike equity markets, there is no transparency of pricing, leaving retail and mid-tier investors struggling to achieve rates of return comparable to those received by fund managers, investment banks and large institutions. While the Reserve Bank of Australia (RBA) sets the official interest rate, the rates received by fixed income investors can diverge considerably.

“With $700 billion invested in one form of fixed interest product … it is time that investors reconsider the way they look at interest rate investments and start to demand a fairer deal, more diversification and a better rate of return,” he said.

While difficult to obtain an accurate reading, FIIG claims the turnover of the fixed interest market markedly outweighs that of equities, with the majority of this driven by institutional investors.

FIIG’s call for transparency comes in the wake of the RBA decision to leave official interest rates unchanged, and speculation that a return to volatility in domestic and global equities will see considerable growth in fixed interest investments.

Stening said smaller investors needed to pay greater attention to their interest rate investments and look for better diversity.

“Few [investors] diversify across a range of fixed income investments as they do with equities … by not diversifying, they miss out on the opportunities that other fixed income instruments can offer.”