A new report from global asset manager Managing Partners Group (MPG) has revealed that nearly all professional investors expect a substantial correction in the equity markets, with 97% predicting declines of up to 10% within the next year. This anticipated shift is expected to lead to a surge in fixed-income investments, particularly investment-grade bonds, as investors seek to reposition assets in response to potential equity downturns.
According to the MPG study, the most anticipated range for this correction sits between 5% and 10%, with over two-fifths (43%) estimating that losses could reach between 7.5% and 10%. Yet, only a minority—less than a third (29%)—foresee this correction happening within the next three to six months. A similar proportion predict it could take up to a year before the full impact is felt. Interestingly, only 1% of the survey respondents see an immediate correction on the horizon, expecting it to hit within the next quarter.
MPG, which manages assets totalling €136 billion, conducted the survey among institutional investors and wealth managers globally. Half of those predicting a correction estimate it will fall between 5% and 7.5%, while a minority (4%) believe losses may extend to 12%. Jeremy Leach, CEO of MPG, highlighted that, despite an overall bullish year for equities, concerns over high valuations, inflation, and geopolitical factors are leading many seasoned investors to expect significant market recalibration.
In light of these findings, investment-grade fixed income stands out as the asset class most likely to attract inflows from equities. MPG’s Melius Fixed Income Fund, a regulated mutual fund designed to capture steady growth with diversified risk, has been cited as one such option for investors. Melius offers a focus on high-yield corporate bonds and life settlements and has recently introduced weekly liquidity to meet rising investor demand. The fund has outperformed its index, boasting a return of 32.17% since its inception in 2019, with a year-to-date return of 4.77%—notably higher than the benchmark iShares Core US Aggregate Bond index, which reported only 1.01% growth for the same period.
Other asset classes identified as potential beneficiaries in the event of a market correction include government fixed income, private equity, and hedge funds. According to MPG’s survey, alternative credit, money markets, and non-investment-grade bonds also feature as attractive options, albeit with comparatively smaller expected inflows.
With its expanding portfolio, including the Melius Fixed Income Fund, MPG has carved a niche for itself in the creation, management, and administration of regulated funds and asset-backed securities, primarily serving sophisticated investors and financial institutions.
In an economic climate marked by unpredictability, MPG’s findings are a timely reminder of the need for portfolio diversification. As investors grow cautious of equity markets’ sustainability, Managing Partners Group’s research provides critical insights into where capital might flow in the event of a market correction, positioning fixed income as the preferred safe haven.
