Rethinking fixed income across the credit spectrum

As the distinction between public and private credit becomes less clear, investors are increasingly rethinking and reassessing traditional fixed income portfolios in response to changing return expectations, regulatory pressures, and diversification needs. While there is clear momentum towards expanded credit allocations, most investors are still operating within an implicit ‘line’. A line that acts as a boundary, limiting how far they move along the credit spectrum.  

Our most recent roundtable brought together institutional investors from across DC pensions, insurance, banking, private banking and asset management to explore this shift in practice. 

Central to the discussion was a simple but important question: where do investors currently “draw the line” across the credit spectrum, and what defines that boundary? 

Different starting points, different constraints

The conversation highlighted that allocation decisions remain closely tied to each investor’s constraints, objectives and governance framework. 

For some, particularly in more regulated segments, liquidity, capital requirements and operational considerations continue to shape how far along the spectrum they are able, or willing, to move. Others, with greater flexibility, are increasingly exploring how private and less liquid credit exposures can complement traditional fixed income, particularly in a world where diversification has become more challenging. 

A shifting macro and market backdrop

Across the discussion, several common themes emerged. Markets are operating in a different environment than in recent history, with higher yields broadly supporting fixed income, even as spreads in some areas remain tight. At the same time, uncertainty around growth, inflation and policy continues to influence how investors think about risk and portfolio construction. 

Beyond labels: Public vs private is no longer the key question

Within this context, the distinction between public and private credit is becoming less clearly defined. Participants highlighted that the choice is often less about the asset label and more about relative value, access and implementation. In some cases, similar risks can be accessed through either public or private markets, with the decision shaped by pricing, liquidity and execution considerations at a given point in time. 

Fixed income as a continuum of opportunities

This shift is also driving a more integrated approach to portfolio construction. Rather than allocating to fixed income in discrete buckets, investors are increasingly considering how a range of credit building blocks can be combined to meet specific objectives, whether that is income, diversification or capital efficiency. In this sense, fixed income is being viewed less as a set of categories and more as a continuum of opportunities. 

Implementation remains the key challenge

However, moving along that continuum is not without challenges. Operational complexity, governance frameworks and infrastructure were all cited as important factors influencing how quickly allocations can evolve, particularly for certain segments such as Wealth and parts of the DC market. Access and implementation remain key considerations, particularly as newer structures and vehicles continue to develop. At the same time, pricing transparency and consistency, particularly in less-liquid segments, were highlighted as ongoing areas of focus for the industry.  Another challenge is the fact that, although this picture has started to evolve,  many allocators still tend to operate within traditional strategic asset allocation frameworks, with thinking anchored in pre-defined asset class buckets.

Despite these considerations, there was a broad recognition that the “line” between public and private credit is not fixed. As understanding deepens and market structures evolve, investors are increasingly reassessing where that boundary should sit and how it may shift over time. 

While there is no definitive answer, the direction of travel is clear. Fixed income is moving  towards a more flexible, outcome-oriented framework, in which public and private exposures are considered together, and the ability to adjust allocations dynamically may become as important as the allocation itself. Equally important is the need to partner with investment managers who can identify, understand and help address these challenges through outcome-focused, solutions-led approaches, supported by a broad toolkit, rather than simply offering standalone funds.

Download Where do you draw the line? — our summary framework for moving along the credit spectrum.