Are investors making informed choices on fixed income?

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22 January 2026 Fixed income

"We believe fixed income continues to offer attractive risk/return potential even in a low spread and duration-challenged environment."

Fixed income allocations have seldom been higher. Now, as investors review their asset allocation for 2026, questions are arising about the tightness of credit spreads, elevated government bond yields and a heightened sensitivity to macro uncertainty.

From a valuation perspective, we believe fixed income continues to offer attractive risk/return potential even in a low spread and duration-challenged environment. By purposefully allocating across fixed income, investors can access attractive yields while keeping overall risk in check. This deliberate approach can also enable portfolios to adapt as market conditions evolve.

We also believe that when asking whether fixed income allocations can still deliver within the overall portfolio, it should not be treated as a single homogeneous asset class. Fixed income assets can play the roles of diversifier, income generator, return driver and alpha provider. So, being clear about the role fixed income plays within portfolios is critical.

Today we see investors responding to valuation and duration challenges through a combination of approaches: