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Fixed Income: Preparing for the Big Shift

Our 2021 research uncovers four major trends transforming fixed income portfolios, revealing what is driving institutional investors across the globe to adopt new ways of fixed income investing.

Report at a Glance

Chief Portfolio Strategist Gaurav Mallik shares four key fixed income trends from our recent survey of institutional investors that together represent a big shift in how future fixed income portfolios will be constructed.

Video (00:39)

The Move to Indexed Fixed Income

Low yields, new capabilities, and structural changes are driving a move towards indexing across the fixed income (FI) spectrum.

Planned Future Index FI Allocations, by Strategy   Over the next three years more than one-third of institutional investors plan to increase their allocation to index strategies for: High Yield, Developed Market Sovereign, Emerging Market Debt, Global Aggregate/Core, and Investment Grade Corporate.

Indexing North America
Indexing Europe
Indexing Australia

ETFs in the Fixed Income Toolkit

ETF performance during 2020 pandemic-related market stress highlights new investment possibilities for institutions.

Appetite for Increasing ETF Use in FI Portfolios, Core and Non-Core  Institutional investors have a strong appetite to increase the use of ETFs within their Global Aggregate/Core FI portfolios as well as in their Non-Core/Satellite FI exposures over the next three years.

ESG Moves Mainstream for Fixed Income

No longer only for equities, ESG is coming for fixed income in a major way.

Planned Future ESG Integration in FI Portfolio, by Strategy   Many segments of institutional investors’ fixed income portfolios will be prioritized for deeper/more comprehensive ESG integration over the next three years, led by High Yield and Investment Grade Corporate.

China, EM Come Online

Most institutions will maintain or increase Emerging Markets exposure, and China's entry into key indexes is a rich source of potential.

EMD FI Strategies: Active, Index, or Combination   In the EMD space, institutional investors are most likely to use a combined active/index strategy for the EMD segment of their fixed income portfolio.

About the Survey

State Street Global Advisors conducted a survey of 358 institutional investors in May 2021. The global survey respondents came from pension funds, wealth managers, asset managers, and sovereign wealth funds. Their responses confirmed that the evolution in fixed income investing is very real and, in fact, that institutional fixed income investing could be at a tipping point where "evolution" will become "revolution."

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More on Fixed Income

Learn more about Fixed Income at State Street Global Advisors.