Bond fund managers are calling for pension trustees to lift restrictions and let them invest in debt rated below investment grade.

While investment banks may boost fixed-income revenues by trading bonds across the rating spectrum, most European asset managers are restricted to buying only high-grade bonds under the terms of their mandates from pension funds. They have been forced to dump debt issued by companies such as Ericsson and Alcatel when they lose investment grade status. In those circumstances bonds are often sold at a significant loss and fund managers are unable to recoup the money or even make gains by buying back the debt ahead of future rating upgrades.