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In the face of ongoing global market uncertainty and heightened geopolitical risks, fixed income investments are increasingly becoming a cornerstone in the portfolios of UAE investors. Kareena Moledina, Lead for Fixed Income Client Portfolio Management (EMEA) at Janus Henderson Investors, recently shared her insights with Khaleej Times on the growing relevance of bonds in the region’s investment strategy.

Moledina highlighted three primary benefits of fixed income investments: steady income, capital preservation, and diversification. With yields currently at attractive levels, investors can secure reliable, tax-free cash flows without assuming excessive risk. This is particularly advantageous in the UAE, where many investors depend on consistent income to meet their financial obligations.

Beyond income generation, bonds act as a defensive anchor in portfolios that are heavily weighted towards equities and real estate. ‘When markets become volatile, fixed income helps preserve capital,’ Moledina explained. ‘It serves as a stabilizing force, especially in economies like the UAE’s, where exposure to property and energy is significant.’

Moledina also emphasized 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 key advantage of fixed income investments. 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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