Mutual Funds: Bond Managers Increasingly Attracted to Stocks

It is often said that low interest rates push investors to favor stocks over bonds. While this may seem like a theoretical concept, it is a reality. Statistics indicate that nearly 2% of the assets in Moroccan bond funds are now composed of equity securities. Although this proportion may appear modest, its value is unprecedented and signifies a gradual transformation in management practices. This amounts to 10 billion dirhams within a total asset pool of nearly 520 billion dirhams held by these bond funds. The shift is primarily driven by the search for yields that exceed those offered by fixed-income products. "Bank stocks provide a dividend yield higher than that of Treasury bonds, while also showing solid fundamentals and reasonable valuations," explains one bond manager. To counteract the structural decline in bond yields, many managers have adopted an active strategy, incorporating these solid stocks into their portfolios. As a result, bond managers are able to capture a significant portion of the stock market's dynamics without compromising their risk profile. Some have reported performance increases of up to 10% since the beginning of the year, and even higher on a rolling twelve-month basis. This performance is satisfying for demanding institutional clients, as well as a growing number of individual investors holding shares in mutual funds. Unsurprisingly, these managers favor large-cap, highly liquid stocks with strong fundamentals. Banks, telecommunications, cement companies, major construction players, and port operators are frequently mentioned. These stocks not only provide the necessary liquidity for this management style but also allow for the generation of double-digit returns.