Moneyspider in the News
21/06/2007
Fleeing 'low risk' investors could prompt corporate bond meltdown
Professional Adviser
The global corporate market is set to move into meltdown as 'low risk' investors hit by dreadful returns are fleeing the sector in droves, according to industry observers.
The current chaos in the global corporate bond (CB) market is set to have a ruinous knock on affect for thousands of private investors, as values a forecast to plummet even further, according to Moneyspider.com a new comparititive website launched in conjunction with Financial Express.
As rising interest rates has seen bond managers both in the US and the UK begin a frenzy of sell off activity, new data by fund analyst Moneyspider.com reveals that investors have been hit badly - and are lagging massively behind the supposedly much riskier UK All Companies sector.
According to the IMA statistics the Corporate Bond sector was April 2007's second most popular ISA sector. However figures have been turned on their heads due to the run of bad performance. And as Moneyspider.com's research reveals this is not a short-term blip, with many big name investment houses struggling to make money for investors.
A £5,000 investment In Virgin Money's Income fund, for example would have produced a gain of just £600 in the five years from May 2002 to May 2007.
And investors in HSBC's Corporate Bond - another rock bottom fund with £559m invested - would have done little better, scraping a profit of £843 on £5,000 over the same period. Investors in the UK's biggest building society, Nationwide, have been similarly disappointed with just a £849 gain over half a decade.
"The fact that the base rate has been so historically low over the past five or so years have given fund marketers ample opportunity to maximise income- but as our data shows, investors need to tread very warily if they are not to lose even more money, especially when inflation is taken into account," said Moneyspider.com's managing director Bill Ross.
He points out corporate bonds are often sold to low-risk investors, who are invariably under the impression they can enjoy higher income than they could get in a standard savings account, plus some capital growth
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