They expect interest to come from investors looking to supplement their income with a steady stream of money over the mid to longer term.
The market has traditionally been favoured by older investors who are nearing retirement or have retired.
But with little growth expected from investment markets in 2004, fund managers believe the nature of corporate bond funds will see them become increasingly popular.
M&G head of fixed interest Richard Woolnough expects his corporate bond fund and strategic corporate bond fund will benefit as IFAs look for steady income for their clients.
Old Mutual Asset Managers corporate bond fund manager Stephen Snowden also believes there will be a lot of interest in the market.
Both fund managers have seen positive performance since taking over their funds one year ago. Snowden took the reins at Old Mutual when Woolnough left for M&G.
Snowden says while markets are “going sideways”, there are still considerable opportunities presented by volatility between the steadier periods.
Woolnough is optimistic that pension funds may want to invest in corporate bond funds, further bolstering the sector.
Snowden says: “It is when the market is not moving and there is so much competition for credits that you have to find opportunities in the market. It is this search for opportunities that I find exciting.”
Woolnough says: “There are so many factors that need considering in terms of credit quality and timescale that the active manager always has to be aware of changes.”