Bonds suffering shift in asset allocation

sector review

The global bonds sector is losing profits as pension funds adhere to the new solvency requirements in Europe

It is fair to say the global bonds sector, with the exception of emerging market bond funds, has not been profitable when compared with the double-digit returns from equities or commodities over the past few years. Investors would have been lucky to eke out a 5% return from the average global bond fund last year and a similar figure the year before that. Bonds in most major powerhouse economies looked particularly unattractive six to 12 months ago, as flat inflation expectations were clearly reflected in the low risk premium attached to investing in debt, resulting in the market being pr...