As global markets continue to grapple with uncertainty and elevated geopolitical risks, fixed income investments are emerging as a vital component in the portfolios of UAE investors.

Kareena Moledina, Lead for Fixed Income Client Portfolio Management (EMEA) at Janus Henderson Investors, shared insights with Khaleej Times on why bonds are becoming increasingly relevant in the region's investment landscape.

“Fixed income offers three key benefits: steady income, capital preservation, and diversification,” Moledina explained. With yields now at attractive levels, investors can lock in reliable, tax-free cash flows without taking on excessive risk. This is particularly valuable in the UAE, where many investors rely on consistent income to meet ongoing financial commitments.

Beyond income generation, bonds serve as a defensive anchor in portfolios heavily weighted toward equities and real estate.“When markets turn volatile, fixed income helps preserve capital,” she said.“It's a stabilising force, especially in economies like the UAE's, where exposure to property and energy is significant.”

Moledina highlighted how bonds complement traditional asset classes in the Gulf Cooperation Council (GCC), which are typically cyclical and sensitive to economic downturns. Unlike equities and real estate, which often decline together during slowdowns, bonds tend to rise when central banks cut interest rates. This inverse relationship helps smooth portfolio performance and reduce overall volatility.

Liquidity is another advantage. While real estate transactions can be slow and costly, and equities volatile, high-quality bonds offer quick access to cash.“Fixed income plays a key role in the liquidity waterfall of a portfolio,” Moledina noted, referring to the hierarchy of assets investors can tap into when needed.

In a dollar-pegged economy like the UAE's, the current“higher-for-longer” interest rate environment presents both opportunities and challenges. On the upside, yields are significantly more attractive than during the ultra-low-rate era, allowing income-seeking investors to earn meaningful returns from high-quality bonds. However, Moledina cautioned that portfolio construction is now more critical than ever.

“Investors should focus on shorter-duration, higher-quality assets to mitigate downside risks,” she advised. Floating-rate securities, such as collateralised loan obligations (CLOs), are gaining popularity for their ability to adjust income streams in line with interest rate movements, offering a natural hedge against volatility.

Risk management remains central to fixed income investing. Moledina outlined key risks including interest rate fluctuations, inflation, credit stress, and geopolitical shocks.“Detailed bottom-up research is essential,” she said, emphasizing the importance of analysing cash flows, leverage, and refinancing profiles to identify resilient issuers.

Diversification across issuers, sectors, and geographies also helps protect portfolios from systemic shocks.“Quality, liquidity, and diversification are the pillars of capital preservation,” she added.

Securitised credit, once a niche segment, is now gaining traction among investors seeking stable income and attractive valuations. With spreads in traditional corporate bonds tightening, securitised assets offer a compelling alternative.“They provide a spread pick-up of 40 to 50 basis points over investment-grade corporates while maintaining higher credit quality,” Moledina said.

Many of these instruments are floating-rate, making them well-suited to the current interest rate environment. Even if rates decline, securitised assets continue to deliver strong returns due to their underlying credit spreads.

Janus Henderson, a leading manager of securitised active ETFs, has played a pivotal role in enhancing liquidity and transparency in the fixed income space.“Our scale allows us to offer efficient execution and clear pricing visibility, especially in securitised credit,” Moledina said.

As UAE investors seek to build resilient portfolios amid global uncertainty, fixed income is proving to be a powerful tool-offering stability, income, and flexibility in a rapidly changing financial landscape.

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