Against a backdrop of heightened uncertainty, investors are increasing allocations across fixed income sectors, particularly to higher quality bonds, and seeking geographical diversification, according to a study by Capital Group.
The inaugural Capital Group Fixed Income Horizons Survey 20252, conducted among 300 institutional investment professionals across Asia-Pacific, EMEA and North America, explores asset owners’ strategic portfolio positioning over a 12–24-month period.
Ed Harrold, Fixed Income Investment Director, Capital Group, said: “The Fixed Income Horizons Survey highlights the importance of diversification to generate returns while minimising risk. Given market uncertainty, rebalancing fixed income portfolios and risk management are becoming a bigger priority for investors. In our view, a global approach to fixed income investing broadens the investment pool and enhances portfolio robustness through strategic diversification. As one of the largest active fixed income managers globally, with over 50 years of experience in bond markets, Capital Group sees clear value in actively managed, well diversified portfolios to meet investors’ long-term financial goals.”
Key findings include:
1. Amidst ongoing uncertainty, investors are upweighting fixed income and hedging risk
· 76% of asset owners plan to increase allocations across all public fixed income sectors over the next 12 months, with investment grade corporate credit being favoured (24%).
· 72% of investors surveyed will be highly selective and cautious in their approach to credit risk over the next 12 months, with most planning to keep credit risk exposure unchanged (54%), and slightly more adding (25%) than reducing (21%) their exposure.
2. Investors are confident over diversification benefits of fixed income
· 75% of respondents think fixed income will maintain or strengthen its ability to provide diversification within portfolios over the next 12 months.
· Asset owners who plan to adjust emerging market debt allocations over the next 12 months cite attractive yields (62%) and diversification benefits (52%) as key drivers.
· 41% of investors will increase private credit allocations over the next 12 months, driven by the potential for higher returns (80%) and diversification benefits (63%).
3. Regional rebalancing of bond portfolios underway with a strong focus on international diversification among Asia-Pacific and EMEA investors
· 44% of respondents are planning significant regional rebalancing of bond portfolios over the next 12 months, rising to 51% among Asia-Pacific respondents and 47% of those in EMEA.
· Within investment grade credit, 47% of EMEA investors are increasing allocations to the US as well as Europe (38%), and 34% of Asia-Pacific investors are increasing allocations to the US and 42% within their home region.
· Within high yield credit, allocators in Asia-Pacific (50%) and EMEA (46%) are prioritising US high yield alongside their home region.
4. Strong conviction in the long-term role of active management within fixed income
· 49% of investors plan to increase their share of active fixed income strategies, with just 5% reducing.
· Most investors think active strategies will add value over passive across all public fixed income sectors over the next 12 months. This view is strongest in relation to high yield credit (87%), emerging market debt (86%) and investment grade credit (81%).
Chris Miles, Head of UK and Ireland Client Group, Capital Group, said: “Market declines can be challenging to endure, but rather than trying to time the market, investors would be wise to stay the course. We continue to see demand for fixed income as a reliable source for capital preservation, diversification and income. Findings from our Fixed Income Horizons Survey reveal that more asset owners plan to increase than decrease allocations across fixed income over the next 12 months. With bonds offering compelling income potential today, investors may be able to take less risk with high-quality bonds while still meeting their return expectations. Adopting a global and diversified approach to fixed income can help in better preparing investors for various market outcomes.”
See the full Capital Group Fixed Income Horizons Survey 2025 report here.
