According to Capital Group's "2026 Fixed Income Outlook Survey," asset owners are increasing their fixed income allocations to restructure portfolios, placing greater emphasis on diversification, geographic rebalancing, and flexibility to navigate macroeconomic uncertainties and rising equity market risks. Manusha Samaraweera, Fixed Income Investment Director at Capital Group, noted that amid prevailing market uncertainties, fixed income instruments have become a core allocation for stabilizing investment portfolios. Investors are increasingly prioritizing geographic diversification and portfolio flexibility, with those in the EMEA and Asia-Pacific regions being particularly active in efforts to mitigate concentration risk.
The survey gathered insights from 300 senior investment professionals across Asia-Pacific (APAC), Europe and the Middle East (EMEA), and North America, analyzing asset owners' fixed income investment strategies for the next 12 to 24 months. Findings indicate that over the coming year, a majority of asset owners plan to first adjust the weighting of their credit portfolios (72% of respondents) and enhance geographic diversification (67%). Additionally, 66% of asset owners stated they will prioritize modifying their investment policies to increase portfolio flexibility, with the most common approach being to raise the ceiling for tactical asset allocation.
Notably, 46% of asset owners are increasing the proportion of active management within their fixed income holdings, while only 5% plan to reduce it, underscoring a significant rise in the emphasis on flexibility. Allocations to liquid fixed income are trending upward for the next 12 months, with 31% of respondents planning to increase their exposure (compared to 25% in 2025) and 20% planning to decrease it (compared to 25% in 2025). Key drivers include diversifying equity risk (61%) and adopting a defensive positioning (59%).
Regarding bond categories, demand remains strong for investment-grade corporate credit (31% of respondents) and emerging market bonds (30%), both exceeding 2025 levels. The proportion of investors planning to increase allocations to emerging market bonds has nearly doubled compared to last year (30% vs. 16%), primarily driven by expectations for diversification benefits and yield premiums. A larger number of asset owners plan to boost allocations to European investment-grade bonds (32%) and Asia-Pacific investment-grade bonds (36%) over the next 12 months, surpassing the proportion planning to increase U.S. investment-grade bond holdings (20%), a reversal from last year's trend. Private credit continues to be the most favored credit sector for increased allocation, with 34% of respondents planning to raise their exposure within the next year.
Irene Chan, Head of Hong Kong and Greater China Client Business at Capital Group, commented that investors are turning to fixed income instruments and rediscovering interest in investment-grade credit bonds and emerging market bonds. In uncertain market conditions, adopting a globally diversified and actively managed fixed income strategy helps maintain portfolio flexibility.
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