Corporate bonds are “overvalued”, say investment professionals

Bonds_newspaperInvestment professionals increasingly see bonds as overvalued, with a five-year high reached for views on corporate bonds.

The perception that corporate bonds were overvalued has climbed for four consecutive quarters, reaching its highest level – over 80% of survey respondents – in five years since the CFA Society of the UK (CFA UK), a professional body, started gathering opinions.

Similarly, government bonds continued to be widely viewed as overvalued, with 78% holding this view.

Will Goodhart, chief executive of CFA UK: “Despite some volatility over the past quarter, bond yields are pretty much as they were when we polled members at the end of last year. It appears that respondents find that somewhat surprising given the sense that growth and inflation are accelerating and that central banks are signalling strongly or weakly that interest rate-setting is entering a period of normalisation – for which read that rates will rise.”

More CFA UK members also viewed gold as being fairly valued. About a quarter, a fall from 32% at the end of 2016, saw gold as overvalued.

Meanwhile, emerging market equities, which “have had good support over the past quarter”, could have further to run.

The general perception of equities being overvalued fell slightly over the quarter, though developed market stocks were still viewed by the majority of respondents as overvalued (68%), whereas around half of respondents considered emerging market equities to be undervalued (48%).

CFA UK’s findings are based on 219 members that gave opinions in February and early March.

©2017 funds europe

Sponsored Profiles

SPONSORED FEATURE: Smarter than beta

Jun 14, 2017

‘Smart beta’ investing is rapidly becoming a popular alternative to both conventional passive management and traditional active management.

SPONSORED FEATURE: Smart beta: Unlocking key drivers of return

Jun 14, 2017

Manuela Sperandeo, iShares Head of Specialist Sales EMEA, tells Funds Europe how investors can leverage smart beta strategies to target numerous outcomes.

SPONSORED FEATURE: Minimum variance indices: Rewriting the rules

Jun 14, 2017

The FTSE Russell indices tracked by lyxor lead to fewer specific risks, fewer valuation and crowding issues and more consistent performance.

SPONSORED FEATURE: The reflationary environment

Jun 06, 2017

Funds Europe talks to Andreas Wosol about the implications of a return to reflation and why the value part of the European equity market could support investors in such an environment.

Executive Interviews

INTERVIEW: Finding managers that can (and do)

Apr 18, 2017

Fabrice Kremer, a fund selector at Banque de Luxembourg Investments, has berated fundamental managers for failing to beat indices, but he remains committed to active funds. He speaks to Nick...

JERSEY INTERVIEW: ‘A steady sort of place’

Mar 21, 2017

The chief executive of Jersey Finance is keen to portray the island as a stable, trustworthy jurisdiction. He talks to George Mitton.

Roundtables & Panels

TRENDING: Smart beta indices continue onward march

Jun 14, 2017

We asked five investment experts how smart beta indices have performed against cap-weighted indices over the past year and what the investment outlook suggests about the prospect for different investment factors.

SMART MONEY: Following the smart money

Jun 14, 2017

We asked six investment professionals about the emphasis they are placing on smart beta and active ETFs and how platforms are adopting these products.