There will be no shortage of volatility in the new year — making expert knowledge even more critical for navigating fixed income markets.
That’s according to the world’s top providers of fixed income research, who are seeing the upcoming challenges as opportunities.
“While the correlation of markets was high this year, we think that the dispersion of performance across markets will increase this year, driven by how different economies evolve,” said Hussein Malik, co-head of global research at JPMorgan Chase & Co. “We expect this divergence to appear both across developed and emerging market economies, as well as between high grade and higher yielding debt markets.”
JPMorgan has once again topped Institutional Investor’s annual Global Fixed Income Research Team, based on a survey of 6,040 investment professionals at 1,650 institutions across the U.S., Europe, Latin America, Asia, and emerging EMEA.
The past year has seen significant macro events, shifting market sentiment, and high correlations across asset classes, according to Marko Kolanovic, chief global markets strategist and co-head of global research at JPMorgan.
“As a result, it has been incredibly important for us to partner across the research platform and teams in fixed income and equity markets. This has also allowed us to be nimble in analyzing these market developments and dynamics,” Kolanovic told Institutional Investor.
Macro events have been driving the research business over the past year, with BofA Securities among those seeing a notable increase in client demand, according to Michael Maras, the firm’s head of global fixed-income, currencies and commodities research.
The firm — which placed No. 2 in the Global Fixed Income ranking — saw client interactions for macro-related research grow by 13 percent over the past year, as it introduced an educational series called “rate teaching,” in view of the inflationary environment. BofA’s research also delved into other areas related to macro events with a focus on inflation products, duration, relative value, and rate volatility.
With rates expected to climb, research providers say allocations to fixed income will be essential for capturing yield.
“We called our outlook for next year, ‘The Year of Yield,’” said Vishwanath Tirupattur, global head of fixed income and quantitative research at Morgan Stanley, which ranked No. 4 on the II ranking.
“Given how much interest rates and bond yields across fixed income asset classes have risen, this will be a year in which we will see significant inflows into fixed income, away from equities,” he said.
Educating investors through insights and thought leadership will remain paramount as a result, with an increased focus on analyst collaboration, advanced technologies, data science, and ESG strategies, according to Brad Rogoff, global head of FICC research at Barclays, which rose one spot to No. 3.
“We continue to evolve our delivery of content for clients and make investments in senior leadership and hires in topical sectors,” said Rogoff. “We believe our cross-discipline and cross-asset approach, combined with a relentless focus on client service, including differentiated events and conferences, provides clients with valuable, integrated investment solutions.”