Investors Missing Out on Global Fixed Income Opportunities, According to New BNY Mellon Survey

- Retail investors who work with financial advisors are more likely to understand fixed-income investments and hold global fixed-income securities in their portfolio

Feb 03, 2016, 09:00 ET from BNY Mellon

NEW YORK, Feb. 3, 2016 /PRNewswire/ -- New survey data from BNY Mellon Investment Management, one of the world's largest investment managers, suggests that a lack of knowledge about the global bond market makes investors reluctant to invest in global fixed-income. In fact, 70% of retail investors do not hold any global fixed-income investments and 62% do not see global fixed-income as important.  The data also indicates that there is a significant opportunity for financial advisors to impact retail investment behavior and sentiment by educating their clients about the benefits of a globally diversified fixed-income portfolio. Forty four percent of retail investors with an advisor believe it is important to include in their portfolios some fixed income exposure outside of the US, compared to 26% of retail investors without an advisor.

The Global Fixed-Income Viewpoints survey was conducted by Brunswick Insight on behalf of BNY Mellon Investment Management which polled 356 retail investors and 201 financial advisors to understand their investment behavior and outlook on the global bond market. The results revealed that financial advisors are much more likely than retail investors to prioritize global fixed-income securities.

  • Only 38% of retail investors surveyed believe it's important that their portfolio includes some global fixed-income securities. By contrast, 63% of financial advisors think it is important that their clients' portfolios include some global fixed-income securities.
  • While a majority (56%) of the financial advisors surveyed recommend holding at least some global fixed-income securities in an investment portfolio, only 30% of retail investors reported having any global fixed-income securities.

"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 U.S.," said Raman Srivastava, Co-Portfolio Manager for the Dreyfus/Standish Global Fixed Income Fund, which received the highest amount of net new flows among products in the Lipper Global Income category in 2015.1 "The survey results highlight this may be an optimal time for investors to consider global fixed income securities as a core holding within their investment portfolio. Financial advisors can close this gap by educating investors on the impact of interest rate hikes on U.S. bond prices, as well as the potential benefits of diversifying their fixed-income portfolios across global markets."

Misperceptions Drive Hesitation

The survey uncovered several reasons why retail investors and advisors may not be allocating more of their investments to global fixed income, including:

  • A lack of understanding regarding the relationship between interest rates and bond prices: 40% of retail investors polled were unaware that as interest rates increase, bond prices generally go down.
  • Misperception of the prevalence of global bonds: 79% of retail investors are either unsure of the percentage of bonds issued outside the U.S., or say that the percentage is less than 50% (when the actual percentage of non-U.S. opportunities is 60%2). Similarly, 59% of advisors are either unsure of the percentage of bonds issued outside the U.S., or say that the number is less than 50%.

Advisors Bullish on Global Diversification Though Inertia Sets in Among Retail Investors

According to the survey, retail investors do not share the same sense of urgency as financial advisors when it comes to increasing their global investment allocation.

  • Advisors show a greater propensity to diversify geographically over the next year, with 44% recommending a more globally diversified investment allocation to their clients.
  • Only 9% of retail investors intend to increase their global diversification over the next 12 months.
  • Although a plurality (40%) have encouraged their clients to keep their current global fixed-income allocation, a considerable portion of advisors (33%) are giving advice to establish or increase a global fixed-income allocation.
  • Only 12% of retail investors say they would increase the global diversification of their fixed-income allocation after a rate hike, while one-third (35%) of advisors would recommend a more globally diversified fixed-income allocation.

Advisors Play a Significant Role Though Their Voice is Not Always Heard

The results reveal that advisors play a significant role in shaping their clients' attitudes toward global fixed income, but also suggest that their recommendations are not reaching all retail investors. In addition, the survey uncovered a gap between retail investors who work with financial advisors and those who don't.

  • Only 26% of retail investors without an advisor think it's important to invest in fixed-income from outside the U.S., and only 16% of them hold at least some global fixed-income securities in their investment portfolio. By contrast, 44% of retail investors with an advisor think that it is important to invest in fixed income from outside the U.S. and 38% hold at least some global securities in their investment portfolios.
  • While 84% of financial advisors say they have given some advice on global fixed-income allocation, most (44%) retail investors with an advisor say that they have not received any advice on global fixed income over the past year.

"Financial advisors have a significant opportunity in 2016 to enhance retail investors' knowledge of the global bond market so they understand both the prevalence and potential performance of international bonds," added Kim Mustin, Co-Head of Global Distribution, Head of Americas Distribution, BNY Mellon Investment Management.   

Global Fixed-Income Viewpoints Study Methodology

The survey was conducted online from November 24 - December 1, 2015 by Brunswick Insight, a third party research firm, on behalf of BNY Mellon Investment Management. It included 201 financial advisors and 356 retail investors (defined as active in their own investment decisions and having $100,000 or more in investable assets).  For financial advisors, the margin of error was +/- 6.9, while  retail investors has a margin of error of +/- 5.2.  Both were at the 95% confidence interval and comprised individuals who qualified through a number of strict criteria.

View the full survey results and infographic here:


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1- BNY Mellon Investment Management analyzed all of the funds in the Lipper Global Income category and sorted them by 2015 total net flows. The Dreyfus/Standish Global Fixed Income Fund ranked #1 as a result of the firm's review through Dec. 2015. (Source: Strategic Insight Simfund/MF Desktop).  According to the Lipper U.S. Open-End, Closed-End, and Variable Annuity Fund Classification Descriptions, Global Income Funds are defined as funds that state in their prospectus that they invest primarily in U.S. dollar and non-U.S. dollar debt securities of issuers located in at least three countries, one of which may be the United States.

2- FactSet, based on total market capitalizations across the foreign and U.S. fixed income markets as tracked by the Barclays Indices as of 12/31/15.

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