Investors look to move up the risk curve in bonds

Research commissioned by NN Investment Partners has found that 45% of institutional investors are willing to increase risk exposure in bond investments.

The survey also found support for convertible bonds with 38% agreeing that they provide downside protection with an equity upside. NN Investment Partners lead portfolio manager, Tarek Saber, commented: “In the current low interest rate environment, investors who were forced to maintain attractive yields have migrated up the risk curve and have attempted to maintain. There remains appetite among investors to go further by risking principal to lock in higher yields.” Saber went on to say that convertible bonds can reduce risk in portfolios, by giving equity-like returns but with less risk. In terms of correlation, he said that they have a 60% correlation to high yield, low correlation to investment grade and negative correlation to government bonds.