BNY Insight Investment Partnership EU

Flexible mandates and selective credit are being used to navigate tighter markets.

In this pan-European edition of The Insight Edge, produced by Citywire in partnership with BNY Investments, top fund selectors from Switzerland, Italy, Germany, France and Spain reveal how fixed income strategies are evolving across the continent. Faced with diverging rate paths and tight local spreads, European investors are leaning into global credit, regional flexibility, and active duration management. Rather than anchor portfolios to domestic debt, they are seeking alpha through tactical allocation, sector rotation, and credit selection across geographies. Covered bonds, short-dated investment grade, and flexible strategies dominate - with caution around high yield. The emphasis is on adapting to uncertainty, not just defending against it. Explore how Europe's fund selectors and wealth managers are repositioning portfolios as falling cash rates force a rethink of where real yield and diversification can still be found.

Europe’s fixed income reset:

flexibility over formula

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As cash rates fall, where can investors look for yield and diversification?

Top investors from across Europe debate fixed income strategies as falling rates and tight spreads reshape the yield landscape.

In an uncertain geopolitical environment where cash is no longer king, fixed income is a key component of investing. But where do investors need to be positioned when it comes to balancing caution, diversification and satisfactory yields? The key questions for fixed income investors right now include where to be positioned on the duration curve, where to find opportunity on the fixed income spectrum, and how to add value via credit selection. In a panel hosted by Citywire in partnership with BNY Investments, leading European fund selectors share how they’re approaching today’s environment. Across continental Europe, investors face very different yield curve environments, but a similar dilemma: can bonds provide the strongest yield for the best risk-return trade-off? As Yvan Roduit of Raiffeisen explains, ‘It’s very difficult to find yield and spreads are super tight… the situation leads investors to go to less-safe bonds.’ Duration and geographic positioning are two of the most important factors in generating returns from fixed income portfolios. April LaRusse of Insight Investment, a BNY company, notes, ‘We have clients saying “I think I’m going to have a global portfolio instead”… being able to move geographically more readily makes some sense.’

This panel featured: April LaRusse, head of investment specialists, Insight Investment Yvan Roduit, head of investment advisory, Raiffeisen Antonio Cannizzaro, portfolio selection manager, Eurizon Capital Cesar Gimeno Valverde, senior multi-asset portfolio manager, Mapfre Asset Management Amy Maxwell, managing editor, Citywire Engage

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Pan-European investors share how fixed income strategies are evolving, particularly in relation to duration, risk and credit quality during volatile markets and tight spreads.

Citywire, in partnership with BNY Investments, convened a European roundtable to explore how professional investors are recalibrating fixed income strategies amid resurgent volatility. Based on new research from Italy, Spain and Switzerland, investors revealed a common concern: protecting capital while enhancing yield in an environment where spreads are tight and uncertainty is high. The discussion spanned across regions, with Swiss investors facing negative rates and high hedging costs, while Spanish and Italian portfolios are rebalancing toward cautious yet yield-enhancing exposures. Notably, there's caution around high yield at current valuations, with a preference for quality credit and short-dated bonds. Insight Investment’s April LaRusse emphasised the growing demand for active, tactical management and focused solutions. The group also explored flexible bond strategies, duration positioning, and the delicate balance between autonomy and house views.

Fixed income reset: European investors pivot amid market volatility

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Fixed income in an

Stronger yields, increased equity volatility, and shifting bond/equity correlations post-2022 have changed asset allocation thinking.

Fixed income becomes a vital part of portfolios again

Many investors favour more flexible or defensive mixes, often shifting from the traditional 60/40 toward a 50/50 or even bond-heavy 40/60.

Alternatives and shorter-duration bonds are increasingly used to diversify and reduce duration risk.

50/50 or even 40/60 equity/bond allocation, especially for capital-preservation-focused mandates.

UK-based investor

FINDINGS

Today’s strong overall yields, coupled with an uncertain geopolitical backdrop and high equity valuations, make bonds a dynamic component of investor portfolios. Citywire, together with BNY Investments, engaged with key investors to find out exactly how they are making the most of market opportunities and what they really want from a manager. Inevitably, opinions diverged – but a number of clear trends emerged.

uncertain world

With equity volatility rising and cash yields falling, investors are rethinking traditional portfolio mixes.

Higher bond weighting than the traditional 60/40, with an emphasis on tactical and shorter duration.

UK-based investor

Given the current risk premium, at least 60% should be in fixed income.

Spain based investor

Fixed income isn't uniform … be very clear on duration risk.

UK-based investor

While fixed income has shown a higher correlation with equities in recent years, shorter-duration and high-quality bonds can still provide attractive returns and meaningful portfolio diversification

Switzerland-based investor

Covered bonds continue to present a compelling alternative.

Switzerland-based investor

We prefer short-term investment grade bonds. Even more so if we talk about credit.

Italy-based investor

Short-duration, high-quality fixed income … balances safety, income, and capital gains.

UK-based investor

Short-duration investment grade credit and covered bonds are most frequently cited.

Floating-rate notes, collateralised loan obligations, and short-term government debt are common.

FINDINGS

As cash yields are projected to decline amid falling policy rates, investors are seeking low-risk alternatives with better yield.

Replacing cash in portfolios

The majority support flexible strategies, especially those with a strong track record and broad mandates.

Some remain sceptical due to poor historical performance or directional missteps.

FINDINGS

High rate volatility and tight credit spreads make active duration and sector rotation more relevant. Choosing the right manager is vital.

Value in flexible bond strategies

Yes, flexible bond strategies make sense today. With tightspreads and rate volatility, active and diversified approachescan better capture value and manage risk across sectors.

Switzerland-based investor

Having a manager with the flexibility to allocate between different fixed income assets and also move within a range of duration is very useful at this time.

SPAIN based investor

There is value in flexible strategies, especially those with contained volatility.

ITALY-based investor

We see value in flexible bond strategies as they can get relative value trades.

UK-based investor

I'd rather have a manager who can move quickly than be tied to a static benchmark.

UK-based investor

Strong preference for credit selection, with many also using relative value strategies.

Curve positioning needs to be tactical in light of overall uncertainty.

FINDINGS

Recession fears and rate uncertainty enhance the case for active alpha-seeking in fixed income.

How are investors looking to generate alpha with bond strategies

Mostly in credit selection. It’s the easiest source of alpha.

Germany-based investor

Relative value strategies and curve positioning – without giving up global macro.

Italy-based investor

Credit selection … bottom-up fundamentals matter more than ever.

UK-based investor

At current levels, investment grade credit offers a yield pickup … useful in terms of carry.

ITALY-based investor

Would like to see spreads closer to 150–160 basis points before leaning in.

UK-based investor

I see investment grade as offering a decent middle ground (better carry than gilts or cash) without taking on excessive credit risk.

UK-based investor

Investors generally see positive risk-adjusted returns in investment grade despite current tight spreads. Most would demand wider spreads to justify more aggressive allocations.

Preferred spread thresholds: 100-160 basis points, varying by region.

FINDINGS

Tight spreads and macro uncertainty prompt cautious optimism around investment grade, especially short-dated paper.

Investment grade is widely viewed as the sweet spot

100–125 basis-point spread is the minimum to justify the risk.

Germany-based investor

Focus on high-quality high yield selection with an internal credit rating.

Germany-based investor

Long/short credit funds to benefit from enormous short-side opportunities.

Italy-based investor

We don't invest much in high yield … but 8-10% spreads could be interesting.

UK-based investor

Preference for BB-rated, short-duration high yield, or long/short credit funds.

Emphasis on active, bottom-up managers with strong credit selection and regional flexibility.

FINDINGS

Heightened risk of global recession means investors are cautious on high yield credit; active approaches are favoured with an emphasis on quality, flexibility, and downside protection.

High yield: Recession risks weigh on the market

We like to have long-duration bonds as a tail hedge.

Switzerland-based investor

Currently positioned in the short term being flexible between 2–3.5 years

SPAIN based investor

1–3 year part preferred; longer duration for protection.

ITALY-based investor

Short end looks to be the most attractive in terms of returns available and lower interest rate sensitivity.

UK-based investor

Focus on intermediate and short maturities … manage risks and capture upside.

UK-based investor

Most prefer short or intermediate durations (1-5 years), citing yield stability and lower rate risk.

A few are using barbell or steepener trades, and some allocate to longer durations for risk-off protection.

FINDINGS

Curve steepening expectations, inflation uncertainty, and regional fiscal policies influence views.

Curve positioning is vital

Preference for European credit … little interest in US bonds.

France-based investor

US uncertainty … (means) allocation to European curves preferable.

Italy-based investor

Europe offers more value than the US.

UK-based investor

Europe is generally favoured for fixed income due to more stable inflation outlooks and valuations.

Some investors retain US exposure, especially when hedged for currency risk.

FINDINGS

Divergent monetary policies, political uncertainty in the US (e.g. Trump tariffs), and valuation differences shape regional preferences.

Regional allocation: US vs Europe

Volatile markets create dislocations and chances to add value.

Switzerland-based investor

Flexible approach is crucial … relative value strategies needed.

Italy-based investor

Fixed income is now a real alternative to equities.

UK-based investor

Overwhelming consensus on the need for flexible, regionally targeted management.

Emphasis on macro awareness, curve management, and cross-sector positioning.

FINDINGS

With diverging central bank paths, investors highlight the need for nimble, differentiated strategies.

Need for targeted and flexible fixed income approach

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Volatile markets create dislocations and chances to add value.

Switzerland-based investor

Flexible approach is crucial … relative value strategies needed.

Italy-based investor

Fixed income is now a real alternative to equities.

UK-based investor

Overwhelming consensus on the need for flexible, regionally targeted management.

Emphasis on macro awareness, curve management, and cross-sector positioning.

With diverging central bank paths, investors highlight the need for nimble, differentiated strategies.

Need for targeted and flexible fixed income approach

FINDINGS

Preference for European credit … little interest in US bonds.

France-based investor

US uncertainty … (means) allocation to European curves preferable.

Italy-based investor

Europe offers more value than the US.

UK-based investor

Europe is generally favoured for fixed income due to more stable inflation outlooks and valuations.

Some investors retain US exposure, especially when hedged for currency risk.

Divergent monetary policies, political uncertainty in the US (e.g. Trump tariffs), and valuation differences shape regional preferences.

FINDINGS

Regional allocation: US vs Europe

We like to have long-duration bonds as a tail hedge.

Switzerland-based investor

Currently positioned in the short term being flexible between 2–3.5 years.

SPAIN based investor

1–3 year part preferred; longer duration for protection.

ITALY-based investor

Short end looks to be the most attractive in terms of returns available and lower interest rate sensitivity.

UK-based investor

Focus on intermediate and short maturities … manage risks and capture upside.

UK-based investor

Most prefer short or intermediate durations (1-5 years), citing yield stability and lower rate risk.

A few are using barbell or steepener trades, and some allocate to longer durations for risk-off protection.

Curve steepening expectations, inflation uncertainty, and regional fiscal policies influence views.

FINDINGS

Curve positioning is vital

Focus on high-quality high yield selection with an internal credit rating.

Germany-based investor

Long/short credit funds to benefit from enormous short-side opportunities.

Italy-based investor

We don't invest much in high yield … but 8-10% spreads could be interesting.

UK-based investor

Preference for BB-rated, short-duration high yield, or long/short credit funds.

Emphasis on active, bottom-up managers with strong credit selection and regional flexibility.

Heightened risk of global recession means investors are cautious on high yield credit; active approaches are favoured with an emphasis on quality, flexibility, and downside protection.

High yield: Recession risks weigh on the market

FINDINGS

100–125 basis-point spread is the minimum to justify the risk.

Germany-based investor

At current levels, investment grade credit offers a yield pickup … useful in terms of carry.

ITALY-based investor

Would like to see spreads closer to 150–160 basis points before leaning in.

UK-based investor

I see investment grade as offering a decent middle ground (better carry than gilts or cash) without taking on excessive credit risk.

UK-based investor

Investors generally see positive risk-adjusted returns in investment grade despite current tight spreads. Most would demand wider spreads to justify more aggressive allocations.

Preferred spread thresholds: 100-160 basis points, varying by region.

Tight spreads and macro uncertainty prompt cautious optimism around investment grade, especially short-dated paper.

FINDINGS

Investment grade is widely viewed as the sweet spot

Mostly in credit selection. It’s the easiest source of alpha.

Germany-based investor

Relative value strategies and curve positioning – without giving up global macro.

Italy-based investor

Credit selection … bottom-up fundamentals matter more than ever.

UK-based investor

Strong preference for credit selection, with many also using relative value strategies.

Curve positioning needs to be tactical in light of overall uncertainty.

Recession fears and rate uncertainty enhance the case for active alpha-seeking in fixed income.

FINDINGS

How are investors looking to generate alpha with bond strategies

Yes, flexible bond strategies make sense today. With tight spreads and rate volatility, active and diversified approaches can better capture value and manage risk across sectors

Switzerland-based investor

Having a manager with the flexibility to allocate between different fixed income assets and also move within a range of duration is very useful at this time.

SPAIN based investor

There is value in flexible strategies, especially those with contained volatility.

ITALY-based investor

We see value in flexible bond strategies as they can get relative value trades.

UK-based investor

I'd rather have a manager who can move quickly than be tied to a static benchmark.

UK-based investor

The majority support flexible strategies, especially those with a strong track record and broad mandates.

Some remain sceptical due to poor historical performance or directional missteps.

High rate volatility and tight credit spreads make active duration and sector rotation more relevant. Choosing the right manager is vital.

FINDINGS

Value in flexible bond strategies

Covered bonds continue to present a compelling alternative.

Switzerland-based investor

We prefer short-term investment grade bonds. Even more so if we talk about credit.

Italy-based investor

Short-duration, high-quality fixed income … balances safety, income, and capital gains.

UK-based investor

Short-duration investment grade credit and covered bonds are most frequently cited.

Floating-rate notes, collateralised loan obligations, and short-term government debt are common.

As cash yields are projected to decline amid falling policy rates, investors are seeking low-risk alternatives with better yield.

Replacing cash in portfolios

While fixed income has shown a higher correlation with equities in recent years, shorter-duration and high-quality bonds can still provide attractive returns and meaningful portfolio diversification.

Switzerland-based investor

Fixed income isn't uniform … be very clear on duration risk.

UK-based investor

Given the current risk premium, at least 60% should be in fixed income.

Spain based investor

Higher bond weighting than the traditional 60/40, with an emphasis on tactical and shorter duration.

UK-based investor

50/50 or even 40/60 equity/bond allocation, especially for capital-preservation-focused mandates.

UK-based investor

Many investors favour more flexible or defensive mixes, often shifting from the traditional 60/40 toward a 50/50 or even bond-heavy 40/60.

Alternatives and shorter-duration bonds are increasingly used to diversify and reduce duration risk.

FINDINGS

Stronger yields, increased equity volatility, and shifting bond/equity correlations post-2022 have changed asset allocation thinking.

Fixed income becomes a vital part of portfolios again

With equity volatility rising and cash yields falling, investors are rethinking traditional portfolio mixes.

Fixed income in an uncertain world

Markets rarely move in a straight line – and in credit investing, that’s often where the opportunities lie. In a recent discussion, Adam Whiteley, head of global credit at Insight Investment (a BNY company), outlined the principles and processes that have enabled his team to deliver consistency for clients while navigating some of the most challenging conditions in recent memory. Whiteley shares lessons from 2022’s turbulent bond markets, why volatility can be an ally for active managers, and how his team’s disciplined risk controls have helped them to avoid every investment grade default since 2011. With a global investment grade universe offering thousands of potential opportunities, he offers a clear view on where dislocations and mispricings may be creating compelling entry points for long-term investors. For wealth managers, his insights provide both strategic perspective and actionable ideas for portfolio positioning in uncertain times.

Adam Whiteley, head of global credit at Insight Investment, shares lessons from turbulent markets, why volatility can create opportunity, and how his team avoids defaults.

Credit clarity in volatile times

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