A new study by California-headquartered investment manager Capital Group shows that there is a shift towards Europe and Asia-Pacific investment grade (IG) credit and emerging market debt (EMD) as asset owners reassess concentration risk.

Asset owners are increasing allocations to fixed income as they focus portfolios in response to heightened macro uncertainty and equity market risk, prioritising diversification, geographic rebalancing and flexibility, according to a study by investment manager Capital Group.

The Capital Group Fixed Income Horizons Survey, conducted among 300 investment professionals across Asia-Pacific, Europe and the Middle East (EMEA) and North America, examined how institutional asset owners are positioning fixed income portfolios over the next 12 to 24 months.

“Fixed income is increasingly being used to stabilise portfolios as uncertainty persists," said Manusha Samaraweera, fixed income investment director, Capital Group. “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,” he continued. “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.”

Key findings
Agility and diversification rise as uncertainty persists. Adjusting credit portfolio composition (72 per cent) and geographical diversification (67 per cent) are top priorities for most asset owners over the next 12 months. 

Two thirds (66 per cent) are prioritising changes to their investment approach to increase agility, most commonly by increasing tactical asset allocation limits.

Forty six per cent are increasing the use of active management within fixed income, while just 5 per cent are decreasing this, underscoring the growing emphasis on flexibility.

Investors are increasing liquid fixed income exposure: liquid fixed income allocations are trending up over the next 12 months: 31 per cent plan to increase (vs 25 per cent in 2025); 20 per cent plan to decrease (vs 25 per cent in 2025).

Key drivers are diversifying equity risk (61 per cent) and defensive positioning 59 per cent.

Demand is rising for Investment Grade (IG) corporate credit (31 per cent) and emerging market debt (EMD) (30 per cent) – both higher than 2025.

IG credit sees gains for Europe and Asia-Pacific as core asset owners plan to increase allocations to European (32 per cent) and APAC (36 per cent) IG credit than US IG credit (20 per cent) over the next 12 months, reversing last year’s trend.

Home bias persists, but cross-regional interest is building vs 2025: EMEA is adding APAC allocations (36 per cent vs 27 per cent), APAC is adding Europe (29 per cent vs 13 per cent), and North American investors are adding European allocations (22 per cent vs 18 per cent).

EMD demand is reaching new highs: nearly twice as many investors plan to increase EMD allocations compared with last year (30 per cent vs 16 per cent), driven by expectations of diversification benefits and yield premium.

Over three-quarters expect real yields in EMD sectors to remain stable or rise over the next 12 months, suggesting continued attractiveness vs developed market credit. 

Private credit demand remains robust
Private credit remains the most popular credit sector for increased allocations, with 34 per cent planning to increase exposure over the next 12 months.

A majority (58 per cent) of asset owners now say that private credit makes up 10 per cent or more of their fixed income allocations, up from 39 per cent in 2025. 

“As dispersion increases across regions and credit sectors, many investors are using active management to navigate shifting correlations and uncover resilient sources of income. Our study highlights a shift toward fixed income, alongside renewed interest in investment grade credit and emerging market debt,” Toby Chan, head of client group, Hong Kong and Greater China, Capital Group, said. “Against this backdrop, a globally diversified and actively managed approach to fixed income is a way to maintain flexibility in uncertain conditions.”

As Capital Group approaches its 100th anniversary in 2031, its long-term strategy remains rooted in its mission to improve people’s lives through successful investing. With over 9,000 associates and 33 offices around the world, Capital Group manages $3.3 trillion in assets for millions of wealth management and institutional clients around the world.