This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on Feb 15 - 21, 2016.

Investors are reluctant to invest in global fixed-income instruments due to a lack of knowledge about the market even though the asset class looks attractive, according to a survey released on Feb 3. 

The survey, conducted by international research firm Brunswick Insight on behalf of BNY Mellon Investment Management, revealed that more than two-thirds (70%) of retail investors do not hold any global fixed-income investments, while more than half (62%) do not see such investments as important. 

Nevertheless, investors who work with a financial adviser are more likely to prioritise global fixed-income securities. In the same survey, almost half (44%) of retail investors with an adviser believe it is important to include in their portfolios some fixed-income exposure outside the US, compared with 26% of retail investors without an adviser. In contrast, 63% of financial advisers think it is important to include some global fixed-income securities in their clients’ portfolios.

Retail investors may be shying away from global fixed-income instruments because they lack an understanding of the relationship between interest rates and bond prices and the misperception of the prevalence of global bonds.

“The global bond market is at an inflection point — we believe the disconnect in global monetary policy has created an opportunity to generate positive fixed-income returns outside the US,” says Raman Srivastava, co-portfolio manager for the Dreyfus/Standish Global Fixed Income Fund, which received the highest amount of net new flows among the products in the Lipper Global Income category in 2015.

Retail investors also do not share the same sense of urgency as financial advisers when it comes to diversifying their global investment allocation into bonds. Only 12% of retail investors say they would increase the global diversification of their fixed-income allocation after a US rate hike, while one-third (35%) of advisers would recommend a more globally diversified fixed-income allocation.

The survey polled 356 retail investors and 201 financial advisers in November and December last year. BNY Mellon Investment Management is one of the world’s leading investment management organisations and BNY Mellon is one of the top US wealth managers, with US$1.6 trillion in assets under management as at Dec 31, 2015. 

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