A recent report by global asset management firm Managing Partners Group (MPG), a specialist in regulated mutual funds and asset-backed securities, with US$500 million ($662.0 million) in gross assets across two funds, has found that a market correction in equities may be imminent.
Nearly all professional investors or 97% of those surveyed anticipate a correction, with 93% of respondents forecasting the magnitude of this decline to fall between 5% and 10%.
The study, which draws on insights from institutional investors and wealth managers overseeing EUR136 billion ($2.29 billion) in assets, reveals a variety of perspectives on the timing of this market shift. Fewer than a third or 29% of surveyees expect the correction within the next three to six months, while approximately 30% project a six-to-nine-month window.
Another 30% foresee the correction in nine to twelve months, while a mere 1% predict a near-term shift within the next three months. A small minority of 7% expect the correction only in a year’s time, and 3% believe it may not occur at all.
Opinions on the potential size of the downturn reflect similar caution. Among those expecting a correction, half predict a fall of between 5% and 7.5%, and 43% anticipate a sharper contraction of between 7.5% and 10%.
Only 4% foresee a more significant drop between 10% and 12%, while just 3% see a more modest dip of between 3% and 5%.
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MPG’s research found that investment-grade fixed income is the asset class that is predicted to benefit the most from any correction in the equity markets. This is followed by government fixed income, while private equity and hedge funds hold third and fourth place, respectively.
Alternative credit, money markets, and non-investment-grade fixed income trail close behind, and real estate as well as renewables are also noted. Life settlements take the tenth spot, indicating a diverse range of strategic preferences among investors.
At the core of MPG’s offerings is the Melius Fixed Income Fund, a regulated mutual fund that pursues steady growth with risk diversification. Designed for adaptability, Melius has transitioned to offering weekly liquidity and dealing frequency, a shift from its previous monthly structure with a 90-day notice period.
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Launched in late 2019, Melius has delivered a 32.17% return since inception and achieved 4.77% in the year-to-date (ytd), outperforming the iShares Core US Aggregate Bond index, which posted a modest 1.01% ytd return. The fund’s performance draws strength from its exposure to diverse fixed-income markets across the US, UK, Europe, and Switzerland, and from its yield-driven strategy, which is less vulnerable to interest rate volatility.
Jeremy Leach, MPG CEO, says: “There is growing talk of a correction in the equity markets and our research indicates that institutional investors and wealth managers anticipate this could take place as early as in the next three months and be as high as 10%. There is a range of asset classes that they believe will benefit from a correction, with fixed income topping the list. MPG’s Melius Fixed Income Fund gives investors the benefits of diversification as well as offering weekly liquidity and dealing frequency, as it continues to outperform its index.”
