Interest rates chill fixed-income managers
A mass movement of funds totaling $1 trillion might be afoot if anxiety about interest rates gets any worse.
Investors are increasingly skittish about a zero or rising interest-rate environment, says a May report from Casey, Quirk & Associates, and that could trigger hundreds of billions of dollars in redemptions from traditional fixed-income portfolios and funds. That would create substantial risk for U.S. fixed-income managers that rode the past dozen years of declining rates to record revenue and profit growth, says the report, titled When the Tide Turns: Building Next Generation Fixed Income Managers.
The white paper’s timing was good. It was published in May, the same month that interest rates bolted north by 50 basis points, driven by concerns about the Federal Reserve’s continuing commitment to its quantitative easing program. The fallout? Every bond fund cate