Fixed income 'not providing buffer expected'
Share markets around the world have slumped as the effects of Covid-19 spread. Many have fallen between 25% and 30% from peak to trough.
Douglas said it had been notable that, starting from such a low interest rate base, there had not been a fixed income lift to offset as much of that drop as had been seen in previous downturns – particular compared to the defensive boost it had provided in the global financial crisis.
“The only asset class that has provided a return is cash … the official cash rate has dropped from 1% to 0.15% but we’ve still got Government bonds selling off.”
Greg Bunkall, at Morningstar, said bond funds had played a significant role in defending capital. “While traditionally you hoped bonds would be even more supportive – they are still doing a job here in limiting losses.”
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