The current, historically low level of interest rates (and therefore bond yields) makes it difficult to see where return might come from in the coming years across large parts of the bond market. As a consequence of this, Danske Invest introduced a labelling system in December 2019 for funds where return potential is particularly affected by the low level of interest rates.
“We regularly monitor those of our funds where investors need to be extra vigilant about the possibility of a positive return due to the current low level of interest rates. This applies, in particular, to a significant share of our bond funds. We have just updated our return models and expectations for return, with the result that the number of funds flagged with low return expectations has increased,” says Kim Thelle Pilgaard, investment specialist at Danske Invest.
Speak to an advisor about your optionsFuture return in the bond markets depends on how interest rates develop going forward. While the opportunities for return in the flagged funds are affected by the low interest rate environment, they may still be relevant for individual investors, for example as an element in a broad savings portfolio.
“Whether you should include the flagged funds in your savings portfolio depends on a great many factors, such as your other investments, your expectations on interest rate levels, plus your risk appetite and investment horizon. As with other Danske Invest funds, we always recommend that your investment decisions are made in collaboration with an advisor,” concludes Kim Thelle Pilgaard.
The labelling appears in the fund overviews as a small dark-blue exclamation mark and on the web pages of the individual funds that are affected.