InvestmentMarkets and Income Asset Management highlight opportunities in a shifting rate
After a year marked by volatility, fixed income is moving back into focus as investors look for safety and stable returns. With cash rates falling and equity markets looking fully priced, demand for income products has risen sharply.
Darren Connolly, CEO of InvestmentMarkets, said the trend reflects a broader shift in investor behaviour. “Investors have enjoyed higher cash returns in recent years, but as those rates fall away, they are looking for alternatives. Fixed income is emerging as a key part of that search, particularly for investors who want to protect capital and maintain income levels,” he said.
Cameron Window, Executive Director at Income Asset Management (IAM), said demand has been strongest for long-dated fixed-rate bonds. “Banks have been issuing 10-year paper in the 5.5 to 6.5% range, and those deals are oversubscribed many times over,” he said. “There’s a huge amount of money sitting on the sidelines, and when investors see the chance to lock in future income at those levels, they are jumping all over it.”
Window noted that access remains one of the biggest differentiators in the asset class. “Many investors default to funds or ETFs for fixed income exposure, but direct access gives you control. You know exactly what you hold and you can express your own view on interest rates. We also provide access to syndicated loan markets, investing alongside major institutions like super funds and investment banks. That’s a part of the market investors often don’t see,” he said.
One example is a recent Foxtel syndicated loan, issued after its acquisition by global sports provider DAZN. “It was a senior secured facility paying bank bill swap rate plus 5.00%+, effectively delivering 9%+. For wholesale investors, that’s a high-yielding, institutionally-backed deal with meaningful asset security,” Window said.
Connolly said this type of diversification is increasingly attractive to self-directed investors. “Fixed income has long been overlooked in private portfolios, often because it was seen as complex or hard to access. But what we’re seeing now is investors realising that bonds and loans aren’t just defensive, they can be a meaningful source of yield and liquidity, particularly when equity markets look stretched,” he said.
For conservative investors, IAM emphasises investment grade products, yielding around 5.5 to 6.5%, with strong liquidity and low risk. For balanced investors, higher-yielding bonds and loans in sectors like mining, infrastructure, and non-bank lending can lift overall returns while maintaining diversification.
Looking ahead, Window said the outlook for fixed income is anything but dull. “With interest rates expected to continue to fall, we know bond prices will rise. That gives investors not just steady income but also the potential for capital gains. At the same time, the phasing out of listed hybrids is forcing billions of dollars to find a new home. We’re already seeing that money flow toward opportunities in this space,” he said.
Connolly agreed that conditions are aligning for fixed income to play a bigger role. “Fixed income is the ballast in portfolios, the part that lets investors, particularly retirees, sleep at night. It may have the reputation of being boring, but right now, for many, boring looks very appealing,” he said.
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