Insto investors in defence mode boost fixed income demand

Yasmine Raso

Senior Journalist

19 May 2026

Fixed income is reaping the rewards of a shift in sentiment among institutional investors leaning into more defensive portfolio positioning in response to “heightened macro uncertainty and equity market risk”, according to a new Capital Group survey.

Of the 300 senior investment professionals working at institutional asset owners across the Asia-Pacific, Europe and the Middle East, and North America, polled as part of the Capital Group Fixed Income Horizons Survey 2026, 31 per cent indicated they were planning on lifting overall allocations to liquid fixed income in the next 12 months, up from 25 per cent last year.

Less asset owners were also looking to decrease their allocations compared to last year, which the study suggests is evidence of a ‘portfolio recalibration’ driven by a raft of factors – including diversifying equity risk (61 per cent), seeking more defensive positioning (59 per cent) and the ability to obtain attractive all-in yields from fixed income assets that are typically less volatile (44 per cent) – but also further exacerbated by the impact of the Iran war on markets.

“Fixed income is increasingly being used to stabilise portfolios as uncertainty persists,” Haran Karunakaran, Fixed Income Investment Director at Capital Group, said.

“Our Fixed Income Horizons Survey shows a growing focus on geographic diversification and portfolio flexibility, particularly among EMEA and Asia-Pacific investors, as they look to reduce concentration risk.

“Asset owners are also evolving their investment approach to give managers greater scope to respond to market change. As one of the world’s largest active fixed income managers, we believe actively managed, well-diversified global portfolios can help investors navigate shifting market conditions and build more resilient portfolios over the long term.”

The report also noted the gains in appetite for private credit – signalled by the 41 per cent of institutional investors looking to increase their allocation over the last 12 months – have now shifted to being shared among investment grade (IG) corporate credit in developed markets (31 per cent) and emerging market debt (30 per cent), with private credit remaining strong at 34 per cent.

The number of asset owners confirming private credit accounts for 10 per cent or more of their fixed income allocations now stands at 58 per cent, up from 39 per cent last year.

At the same time, institutional investors flagged adjusting the composition of credit portfolios (72 per cent) and geographical diversification (67 per cent) as the top priorities for their fixed income allocations over the next 12 months, with a particular focus on growing their use of active management (46 per cent) to ” increase agility [and flexibility].

“As dispersion increases across regions and credit sectors, many investors are using active management to navigate shifting correlations and uncover resilient sources of income,” Jorden Brown, Head of Client Group – Australia at Capital Group, said.

“Our study highlights a shift toward fixed income, alongside renewed interest in investment grade credit and emerging market debt. Against this backdrop, a globally diversified and actively managed approach to fixed income is as a way to maintain flexibility in uncertain conditions.”