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Bond sales to slow in switch to equities

Fidelity International is predicting a slowdown in corporate bond sales towards the latter part of this year.

UK retail sales head Peter Hicks says equity funds are likely to get a boost in the second half as investors shift out of bonds.

“I do not think appetite will stop or reverse but I do think it will slow down.”

IMA statistics for April show bond funds accounted for £1bn of the £2.1bn net retail sales, a marginal fall from February’s figure of £1.1bn for £1.2bn of all net retail sales.

Hicks says a slowdown in sales is likely as investors may look to realise profits from gains they have made.

“I think they might move straight into equity funds. We are seeing a lot of interest in our South East Asia fund but I think UK equities is more likely.”

He says income seekers may also start looking to income-producing equity funds if bond yields are lower.

“You ought to start getting some more dividend growth in 2010 and I think people will look ahead to that.”

But he says bond funds will still maintain some appeal because of the diversification benefits between equities and fixed income.

Premier Wealth Management managing director Adrian Shandley says: “I totally agree there will be a slowdown. We saw this just after the tech bubble burst in 2001 when the equity markets fell out of bed and there were massive sales in corporate bonds, only to end in tears not long afterwards.”

M&G director of corporate communications Richard Miles adds: “We are still seeing strong corporate bond fund sales but it is starting to slow and towards the end of the year it will probably slow further as asset allocators start moving into things like property and equities.”

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