Half of respondents to a survey of institutional investors said they are planning to increase exposure to higher yielding assets such as asset-backed securities.
One in four (25 per cent) institutional investors believe the strong growth in fintech lending companies will lead to greater supply of asset backed securities (ABS), according to new research by Managing Partners Group (MPG).
The asset management group says half (50 per cent) of all the respondents say they will increase their exposure to higher-yielding assets such as fixed income asset backed securities (ABS) because of their concerns about rising interest rates and inflation. This compares with 37 per cent who said they would do so a year ago.
Institutional investors are concerned that inflation will erode the real value of bond yields over the next one to two years with nearly nine out of 10 (88 per cent) saying so.
Jeremy Leach, Chief Executive Officer at MPG, says that with inflation trending higher in the past 18 months or so in western economies, institutional investors will have to adjust their bond and equity portfolios to deal with the headwinds created by monetary policy normalisation and rising interest rates.
“In this scenario, fixed income Asset-Backed Securities (ABS) offer an attractive strategy, with yields high enough to counter rising inflation while being secured against real underlying assets, which is reassuring for investors. This flourishing sector also offers a range of yields and risk profiles to suit a wide range of appetites,” he said.
Three in five (60 per cent) of institutional investors expect their exposure to ABS to rise over the next three years. The most attractive quality driving demand growth in Europe is the fact that ABS are secured against realisable underlying assets, which was cited by 38 per cent.
MPG manages over $500m in a range of alternative and hedge funds.