UK institutional investors are increasing fixed income allocations but adjusting their portfolios in response to geopolitical tensions and government deficits, according to TwentyFour Asset Management’s fixed income investor survey.
61% of 200 UK institutions surveyed about their use of current and future fixed income funds said geopolitics has changed their risk appetite, with half moving to more defensive positions. They cited the ongoing war in Ukraine, Middle East instability and US trade and fiscal policy under the Trump administration as the main drivers.
76% said government deficits will play a role in allocation decisions this year. Recent sell-offs have rattled confidence in sovereign debt, yet almost nine in ten investors said they will stick with or add to their government bond allocations over the next year.
UK assets make up nearly half of institutional portfolios, the survey showed. The share is set to go higher over the next year as more than half of investors look to shift money away from the US amid policy uncertainty.
Bridging the fixed income-tech gap
Nearly 90% investors expect to increase assets dedicated to sustainable strategies over the next 12–24 months, with sustainable bond funds most likely to capture greater portfolio share.
55% plan to adjust private credit exposure, with most intending to reduce allocations. According to the survey, among those maintaining an interest, asset-based lending is the preferred segment.
84% of respondents expect fixed income to outperform cash in the medium term, indicating an optimistic outlook for the asset class.
Ben Hayward, CEO of TwentyFour Asset Management, commented: “It’s no surprise that global trade tensions and broader geopolitical instability have created much uncertainty, yet it’s clear that investors are continuing to direct capital toward fixed income, as elevated yields can not only improve returns, but also provide portfolios some protection against volatility. In these conditions, we think active managers can really prove their worth by targeting the right opportunities while managing the broader market risks.”
