As market uncertainties grow, investors are increasing allocations to fixed income, particularly higher-quality bonds, and seeking geographical diversification.

A new survey by investment manager Capital Group shows that 76% of asset owners plan to increase allocations across all public fixed income sectors over the next 12 months, with a strong leaning ( 24% ) to investment-grade corporate credit.

Meanwhile, 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.

The inaugural Capital Group Fixed Income Horizons Survey 2025 was conducted among 300 institutional investment professionals across Asia-Pacific, EMEA and North America.

It shows that investors are confident in the diversification benefits of fixed income. Of the respondents, 75% think fixed income will maintain or strengthen its ability to provide diversification within portfolios over the next 12 months.

Strategic diversification

“In our view, a global approach to fixed income investing broadens the investment pool and enhances portfolio robustness through strategic diversification," says Manusha Samaraweera, fixed income investment director at Capital Group.

“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."

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.

At least 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% ).

According to the survey, 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 United States and Europe ( 38% ), and 34% of Asia-Pacific investors are increasing allocations to the US and 42% within their home region.

As regards high-yield credit, allocators in Asia-Pacific ( 50% ) and EMEA ( 46% ) are prioritizing US high-yield alongside their home region.

Active strategies

The survey also reveals a strong conviction in the long-term role of active management within fixed income. Nearly half ( 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% ).

“Market declines can be challenging to endure, but rather than trying to time the market, investors would be wise to stay the course,” says Toby Chan, head of client group, Hong Kong and Greater China, at Capital Group. “We continue to see demand for fixed income as a reliable source for capital preservation, diversification and income.”