Shift toward Europe and Asia-Pacific IG credit and EMD as asset owners reassess concentration risk
Asset owners are increasing allocations to fixed income as they recalibrate portfolios in response to heightened macro uncertainty and equity market risk, prioritising diversification, geographic rebalancing and flexibility, according to a study by Capital Group.
The Capital Group Fixed Income Horizons Survey 20262 , conducted among 300 senior investment professionals across Asia-Pacific (APAC), Europe and the Middle East (EMEA) and North America, examines how institutional asset owners are positioning fixed income portfolios over the next 12– 24-months.
“Fixed income is increasingly being used to stabilise portfolios as uncertainty persists,” said Haran Karunakaran, 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. 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%) and geographical diversification (67%) are top priorities for most asset owners over the next 12 months.
• Two thirds (66%) are prioritising changes to their investment approach to increase agility, most commonly by increasing tactical asset allocation limits.
• 46% are increasing the use of active management within fixed income, while just 5% are decreasing this, underscoring the growing emphasis on flexibility.
Investors increase liquid fixed income exposure
• Liquid fixed income allocations are trending up over the next 12 months: 31% plan to increase (vs 25% in 2025); 20% plan to decrease (vs 25% in 2025).
• Key drivers are diversifying equity risk (61%) and defensive positioning (59%).
• Demand is rising for Investment Grade (IG) corporate credit (31%) and emerging market debt (EMD) (30%)—both higher than 2025.
IG credit sees gains for Europe and Asia-Pacific
• More asset owners plan to increase allocations to European (32%) and APAC (36%) IG credit than US IG credit (20%) over the next 12 months, reversing last year’s trend.
• Home bias persists, but cross-regional interest is building vs 2025:
o EMEA adding APAC allocations (36% vs 27%),
o APAC adding Europe (29% vs 13%), and
o North American investors adding European allocations (22% vs 18%).
EMD demand reaches new highs
• Nearly twice as many investors plan to increase EMD allocations compared to last year (30% vs 16%), 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% planning to increase exposure over the next 12 months.
• A majority (58%) of asset owners now say private credit makes up 10% or more of their fixed income allocations, up from 39% in 2025.
Jorden Brown, Head of Client Group – Australia, Capital Group, said: “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. Against this backdrop, a globally diversified and actively managed approach to fixed income is as a way to maintain flexibility in uncertain conditions.”
