Even while raising assets at a breakneck pace in bond funds, mutual fund companies are trying to figure out how to keep the assets, in what they expect to be a rising interest-rate environment in the coming years.
Fearing a backlash from investors who are still piling into bond funds, mutual fund companies are rolling out sales and marketing campaigns to encourage investors to shift assets into other products.Rising interest rates are likely to cause a decline in bond fund values. But fund companies are afraid that investors will blame them for their losses.
Whatever their future problems, bond funds currently dominate all other asset classes; they attracted $28 billion in net inflows last month, according to Morningstar Inc. Fixed-income funds now represent about 30% of the mutual fund market, up from 19% at the end of 2007.
Rather that having to resell a client on a new product each time a different asset class comes into favor, wouldn’t it more effective to sell them on a single strategy that has the ability to tactically shift among all of the asset classes as dictated by relative strength?
