Man in front of mountain

Positioning for the higher rate environment

With significant changes in the rate environment, fixed income allocations have come under increased scrutiny from institutional investors seeking to capitalize on the higher return potential. We partnered with Illuminas to survey institutions on their shifting objectives, fixed income and where they are seeing the greatest opportunity.


Evolving needs, evolving expectations

Key takeaways


Four in five respondents are making – or planning to make – changes to fixed income positions.


Objectives for fixed income are shifting from portfolio ballast to return enhancement and inflation protection.


51% of investors are making changes to private credit have prioritized direct lending.

The 2020s have ushered in an era of elevated costs, more volatility and higher rates. Institutional investors are looking to fortify their portfolios in this new reality, while also capitalizing on the opportunities coming from this market regime. In our survey we found that institutions are evolving their expectations for bonds beyond income and diversification and looking to these allocations for their return potential and ability to mitigate inflation costs.

Changes in fixed income allocations

Given shifting objectives, four in five respondents are making – or are planning to make – changes to fixed income positions.

Respondents noting total return and/or yield as an increasingly important objective are more likely to be increasing both tactical and strategic allocations.

Fixed income portfolio allocations

Going forward, respondents see return and inflation protection as the greatest opportunities to lean into.

In addition to portfolio ballast objectives, fixed income is increasingly being sought for return enhancement and inflation protection.

The new market regime has unlocked investment opportunities not seen in over a decade – bonds can be one of your most powerful tools. However, we believe that institutions will need to be more granular across the asset class to unlock the full potential of the higher rate environment.

Public fixed income

Within public markets, core strategies are coming increasingly into favor.

With higher rates available from Developed Markets Investment Grade and Sovereigns, clients appear to be comfortable looking for yield from lower risk exposures, with Securitized and Multi-Sector offering diversification. The lack of interest in Emerging Market Debt is surprising given its stellar total returns vs DM debt in 2023.

Capitalizing on the rate environment – direct lending

BlackRock experts shared their outlooks for U.S. and European direct lending, discussed why it's poised to be a fast growing alternative to traditional financing and shared portfolio implications including diversification and return benefits.
Market Pulse on direct lending

Why BlackRock for fixed income?

BlackRock offers one of the largest and most diverse array of fixed income solutions, across our fundamental, systematic and credit platforms. Our Aladdin® platform, dedicated team and proprietary technology infrastructure enable bespoke client engagements and the delivery of solutions to institutions around the world.

Contact our institutional team to learn more about fixed income

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