Balanced funds have gained popularity over the past year, as they promise higher returns and more moderate risks than investments in bonds or equities alone, Allianz Global Investors said yesterday.
A fund evenly targeting convertible bonds, high-yield bonds and US equities has soared from US$900 million to US$9.4 billion last month, the fund house said.
“The fund is supported by convertible and high-yield bond coupons, equity dividends and capital appreciation opportunities from all the three asset classes, as well as premiums collected from option writing,” said Doug Forsyth, a San Diego-based managing director for the fund.
The combination of healthy balance sheets, low defaults, accommodative monetary policy and the lack of other yield options for investors has driven the market higher, he said via a teleconference.
Nearly all strategists agree that the outlook for credit is constructive, with minimal defaults projected, Forsyth said.
High-yield and convertible bonds have a better risk-versus-reward profile than other asset classes, he said, adding that the former shows low correlations with other bonds and has stronger correlations with equities.
As for stocks, the fund house is overweighting US firms in information technology and consumer sectors on grounds that they promise better growth, Forsyth said, adding that peers might place more emphasis on value shares.
The US Federal Reserve is likely to tighten its monetary policy next year, but the pace is not likely to be drastic, he said, lending support to a portfolio of diversified investment tools.
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