In today’s markets, professional investment approaches are essential to unlock fixed income’s potential to deliver equity-like returns while diversifying risk, writes BNY Investments head of EMEA distribution, Gerald Rehn.
In today's market, bonds can offer equity-like returns with diversified risk profiles. Higher yields, new and growing segments such as private and structured credit, and increased issuance of traditional types of bonds across traditional asset classes provide investors with new return opportunities. The challenge, however, is that it takes sophisticated, professional investment approaches to safely capture them.
After more than a decade of suppressed yields, fixed income has re-emerged as a compelling source of income and total return. Across global markets, return prospects have improved materially, challenging the long-held assumption that equities are the only route to attractive outcomes. Fixed income is no longer just a defensive allocation or portfolio stabiliser; done well, it can be a meaningful driver of risk-adjusted returns.
But this opportunity comes with complexity. Markets remain shaped by uncertainty — from geopolitics and fiscal policy to inflation and interest-rate changes. In fixed income, this elevates the importance of disciplined portfolio construction. Decisions around duration, issuer exposure, credit quality and liquidity are now central to outcomes, not secondary considerations.
This environment has reinforced the value of institutional capabilities: deep analytical resources, global reach, market access and robust risk management. These allow managers to diversify risk, identify relative value and adapt portfolios as conditions evolve — rather than relying on narrow macro views or a small number of directional bets.
The adviser view
BNY Investments' research highlights how advisers are already responding to this shift. In Shaping Tomorrow's Portfolios: The Strategic Role of Fixed Income study, advisers reported increasing allocations to fixed income between June 2024 and June 2025, with expectations of further increases through 2026. The outlook for interest rates was cited as the primary driver of change (55%), followed by inflation expectations (43%) and the relative value of bonds versus other asset classes (42%)1.
Confidence in fixed income is rising — but so too is awareness that implementation matters.
The expanding opportunity set reinforces this point. Growth in areas such as private credit and structured credit offers attractive diversification and income potential, but these markets demand specialist expertise, scale and rigorous risk controls. Without them, investors risk confusing complexity with diversification.
Active risk management
Active management plays a critical role. Despite this, more than a third of retail fixed income assets are managed passively — a higher proportion than in equities. Bond indices can sometimes be structurally less efficient, as they may favour issuers with higher levels of debt instead of those with stronger financial stability. In areas like high yield or emerging market debt, passive investing may introduce unintended risks related to defaults. Experienced active managers have the opportunity to address information gaps, steer clear of weakening credits, and potentially enhance returns through careful security selection.
Equally important is how risk is taken. Strategies built around diversified sources of return and position sizes aligned to conviction are better placed to navigate volatility than those dependent on "one big bet". This approach aims to deliver more consistent outcomes across a range of scenarios, rather than relying on being right about a single macro outcome.
Strong outcomes
Ultimately, fixed income must serve investor objectives. Some investors prioritise dependable income, others capital preservation or flexibility. This is particularly relevant for those approaching or in retirement, where fixed income is evolving from a blunt income tool into a carefully engineered solution. While retail fund structures impose constraints, the industry is making it easier for individual investors to use professional strategies designed to match their income needs with their future expenses.
With bond yields likely to remain structurally higher than in the post-financial-crisis era, fixed income offers an attractive risk-reward trade-off relative to equities. Yet investors are right to remain cautious. Volatility and uncertainty are not temporary features of the landscape.
The message is clear: fixed income can deliver strong outcomes — but only when backed by the breadth, depth and scale of managers capable of navigating today's global bond markets. The best outcomes will go to those who treat fixed income not as a passive asset allocation, but as a sophisticated tool for achieving the outcomes investors value most.
A version of this article first appeared in Professional Adviser, a news and analysis website for financial intermediaries in the UK in March 2026.
The value of investments can fall. Investors may not get back the amount invested.
1Research conducted by NMG Consulting for BNY Investments, based on responses to surveys with 125 fixed income-focused financial advisers between March and April 2025.
Glossary
Bond(s) is a loan of money by an investor to a company or government for a stated period of time in exchange for a fixed interest rate payment and the repayment of the initial amount at its conclusion. Credit quality measures an entity’s ability to meet its debt obligations. Duration is a measure of the sensitivity of a fixed income security or bond fund to change in interest rates. The longer a bonds duration, the more sensitive it is to interest rate movements. Fixed income broadly refers to those types of investment security that pay investors fixed interest or dividend payments until their maturity date. Issuer is a legal entity that develops, registers and sells securities. Issuer exposure refers to the amount of risk an investor or portfolio faces from holding securities issued by a particular entity. Private credit refers to privately arranged loans to companies. Structured credit is investments built from pools of loans or other debt assets.
Important Information
This is a financial promotion and is not investment advice. Any views and opinions are those of the investment manager, unless otherwise noted. The value of investment can fall. Investors may not get back the amount invested. BNY, BNY Mellon and Bank of New York Mellon are the corporate brands of The Bank of New York Mellon Corporation and may also be used to reference the corporation as a whole and/or its various subsidiaries generally. BNY Investments encompass BNY Mellon’s affiliated investment management firms and global distribution companies. Any BNY entities mentioned are ultimately owned by The Bank of New York Mellon Corporation. In Hong Kong, the issuer of this document is BNY Mellon Investment Management Hong Kong Limited, which is registered with the Securities and Futures Commission (Central Entity Number: AQI762). In Singapore, this document is issued by BNY Mellon Investment Management Singapore Pte. Limited, Co. Reg. 201230427E. Regulated by the Monetary Authority of Singapore (MAS). This advertisement has not been reviewed by the Monetary Authority of Singapore.
AP4629-27-04-2026 (6M)
