May 24, 2022 By: AGF

Evolving Investor Preferences for Fixed Income Investments

Download (PDF 673KB) 5 min read


Canadian institutional investors remain deeply committed to having fixed income assets in their portfolios, but their exposure to government and investment-grade corporate bonds continues to wane in comparison to less traditional sources of yield that offer the potential of higher returns like private credit and Emerging Market (EM) debt.

Although asset owners – from public and corporate pension plans to endowments and foundations – believe the primary goals of fixed income are to preserve capital and manage volatility in a diversified portfolio that includes equities, they also cite income generation as a growing priority in a low-interest rate environment that is not expected to change, even as central banks tighten monetary policy in the short term.

The same institutions also agree that allocations to higher-yielding fixed income must be weighed carefully given the potential peril of investing in them. For some, liquidity is the most critical factor in determining the appropriate mix of private versus public investments, while others seem more concerned with how to manage credit, duration and/or geographic risks that may be associated with their portfolios.

Beyond these considerations, asset owners recognize the importance of incorporating environmental, social and governance (ESG) criteria into their investment processes and portfolios, but it’s still “early innings” on this front when it comes to their fixed income holdings, and many say future adoption will be slow.

Granted, how much progress is made going forward may largely depend on the advice and recommendations of investment consultants, for whom asset owners overwhelmingly rely on to fill a new fixed income mandate. Even so, what seems to matter most to Canada’s pension plans, endowments and foundations is the experience, stability and track record of the investment team(s) employed to manage their fixed income portfolios.

The views expressed in this insight based off of the 2022 Greenwich Research. The views are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The commentaries contained herein are provided as a general source of information based on information available as of May 11, 2022 and are not intended to be comprehensive investment advice applicable to the circumstances of the individual. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained here.

This report is provided for informational purposes only and is not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. The comments should not be construed as recommendations to invest in any products or services but rather an illustration of broader concepts.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

® The “AGF” logo is a registered trademark of AGF Management Limited and used under licence.

Our website uses cookies to help you get the best experience. Please Accept or click Edit to control your settings.