After a decade in which equities and alternative assets dominated portfolios, fixed income is firmly back in the spotlight. With interest rates now on a downward trend, fiscal pressures constraining governments, and regulators pushing for more robust retirement income solutions, bonds are once again moving centre stage for wealth managers.
The good news is that today, yields are higher, valuations more attractive, and the range of investable opportunities far broader than many wealth managers and advisers may have historically considered. For those who have long treated bonds as the “defensive ballast” in multi-asset portfolios, today’s market environment demands a fresh look.
To explore these shifts, Wealth DFM’s Jenny Hunter spoke with Rupert Harrison, Senior Advisor to the UK PIMCO Portfolio Management Team, and Simon Hillenbrand, Head of UK Wealth Management at PIMCO. Both stress that the current environment presents one of the most compelling moments in years to reallocate toward bonds and that PIMCO’s global scale and UK expansion leave it well placed to support the needs of wealth managers and their clients in this exciting market sector.
UK fiscal pressures highlight the gilt opportunity
The UK economy, according to Harrison, encapsulates the challenges facing developed markets globally. “The UK is a bit of a poster child for PIMCO’s global outlook,” he says, pointing to slowing growth, high debt and political headwinds.
That debt dynamic is crucial. After years of crisis-driven spending, from the Global Financial Crisis to the pandemic and the energy shock, government balance sheets are stretched. Fiscal credibility now hinges on tough decisions. “The government is bumping right up against its fiscal rules,” Harrison notes. “It’s possible the government will need to raise taxes in the budget this November.”
For investors, the implications are twofold. On the one hand, fiscal tightening will weigh on growth. On the other, it will leave the Bank of England carrying the burden of supporting the economy through further rate cuts. Markets currently expect the Bank to stop easing at around 3.5%, but PIMCO’s view is more dovish. “We expect it to go lower than that, perhaps even below 3%,” Harrison says.
This makes gilts, particularly in the medium-duration five-year part of the curve, increasingly attractive according to Harrison. For wealth managers, the key takeaway is that gilts are no longer simply a “safe but unrewarding” option. Instead, they could play an active role in delivering income and stability, particularly as cash yields begin to decline.
Moving beyond cash and expensive equities
Globally, the story is similar. A‑er years of ultralow rates, the “yield reset” following central bank tightening has transformed the return profile of bonds. “Historically, starting yields have been a strong predictor of future return potential”1 reminds Harrison.
That point matters in a market where equities, especially in the US, remain highly valued. “The equity risk premium, the additional return expected for bearing the risk of equity investments, has declined,” Harrison says. “Going back in history, when equities are this expensive and bond yields this high, bonds have outperformed equities over the following five years. That is obviously the reverse of what we’ve seen over the last 10-15 years, and therefore not something that a lot of investors are expecting. That means that now is a very attractive time to think about reallocating out of some of those expensive equity allocations towards fixed income and high-quality global bonds.”
Cash, by contrast, is losing its appeal. “While short-dated gilts and deposits looked attractive a couple of years ago, we believe central bank easing may steadily erode those yields. We believe by reallocating into high quality global bonds, wealth managers can currently capture 6–7% yields with the potential for capital upside if rate cuts deepen.2 These are the kind of portfolios that we aim to construct in our strategies, and so to us this is a very attractive time to reallocate into high quality global bonds”, says Harrison.
Diversification means more than traditional credit
Not all bond exposures are created equal, however. Harrison believes that traditional investment grade and high yield spreads look quite tight right now, limiting their value. That’s why the PIMCO team argues that diversification across the full fixed income spectrum is essential.
As Harrison explains: “It is possible to find areas of value in conventional credit, but you must work hard, and we see the best opportunities in broader fixed income markets and consistently find attractive valuations and investment opportunities.”
“Agency mortgages in the US, for example, can provide 5% plus yields3 from an asset that is guaranteed by the US government,”4 Harrison points out. Similarly, selective emerging markets offer attractive opportunities in a disinflationary environment. Latin America and South Africa are among the markets where high starting yields combine with scope for central bank rate cuts, and look capable of delivering both income and capital upside.
For wealth managers used to seeing bonds as either “gilts versus corporate credit,” this breadth of approach really matters. “As a global leader in active fixed income, we can access all those fixed income markets and consistently find attractive valuations and investment opportunities,” Harrison says.
Active management as a differentiator
For Hillenbrand, the ability to harness those global opportunities that Harrison highlighted depends on scale and expertise. “There’s a substantial body of evidence showing that active fixed income strategies tend to outperform their respective indices quite consistently over time,”5 he notes. “This consistency is not something we typically see in equity markets.”
PIMCO’s global platform, which has over 200 portfolio managers and 80 credit analysts operating around the clock, clearly gives it reach across every segment of the bond market. Few managers, Hillenbrand argues, can replicate that depth.
But in the UK, the challenge has been access. “Historically, we’ve had a somewhat limited sales footprint.” That is now changing, with new hires in London, an expanded regional sales team and the creation of a Strategic Partners unit focused on intermediaries.
“We are out on the road meeting advisers, wealth managers and their teams, and we’re planning to do much more,” Hillenbrand says. The aim is simple: to ensure UK advisers can translate PIMCO’s global insights into practical portfolio solutions.
Retirement reforms sharpen the income challenge
The FCA’s consultation on pension reforms, coupled with the progress of the Pensions Bill, represents another structural driver in the market. The regulator’s message is clear: advisers must move beyond treating decumulation like accumulation. Tailored retirement income strategies are now required.
For Hillenbrand, this is fertile ground for fixed income. “This shift presents a major opportunity for income-focused investments, and that’s exactly where PIMCO can add value. We are well positioned to help UK intermediaries build strong fixed income portfolios for their clients. Our range of income solutions has a long and consistent track record, all backed up by PIMCO’s 50-year heritage in fixed income.”
He acknowledges that annuities are regaining some ground but stresses their limitations. “When you invest in a bond fund, you not only can benefit from attractive yield potential, but you also maintain capital flexibility and the potential for capital upside,” he says. Advisers can build robust retirement portfolios that combine income, liquidity and growth potential.
Retirement income opportunities and client education
For advisers, today’s economic and market environment presents not only new investment opportunities but also a renewed need for client education around income diversification.
Simon Hillenbrand observes that while the case for fixed income is now stronger than it has been in years, many UK intermediaries may have had limited engagement with the asset class during the long era of near-zero interest rates between 2009 and 2022. “That period made bonds far less attractive, so it’s understandable that fixed income may have slipped down the agenda for many,” he explains. “But since 2022, we’ve seen a major reset in yields. This shift has created a far more compelling landscape for active fixed income investing, one that can deliver not just returns, but diversified income potential for clients.”
Hillenbrand adds that this changing backdrop may make it an opportune time for advisers to re-engage with the asset class. “Fixed income today can offer both breadth and depth of opportunity,” he says. “It’s an area where advisers can add real value through client education, helping their clients to understand how bonds can play a central role in seeking sustainable income as part of a well-diversified portfolio. That’s why we believe now is the right time for intermediaries to reconnect with fixed income.”
Time to rebalance UK allocations
Looking at overall asset allocation, both executives emphasise that UK investors tend to be underweight fixed income in their overall portfolios compared to global peers, with allocations often below 20%.6 That leaves portfolios exposed to equity drawdowns and cash erosion just as bonds are regaining their appeal.
“Historically, gilts have been relatively straightforward investments. Yields have been high, but with both cash and gilt rates expected to come down, now is the time to start thinking more strategically,” Hillenbrand argues.
For Harrison, the conclusion is clear: “With UK interest rates projected to fall to around 3.5% or even lower, we’re now seeing very attractive returns by rotating out of cash and gilts into high-quality global bonds. This shift could provide a yield pickup to around 6–7%, all while maintaining exposure to a diversified portfolio.7 Essentially, the aim is to build portfolios that are not only robust but could potentially deliver equity-like returns, yet with lower levels of volatility. It’s a very exciting moment to consider allocating to these types of exposures right now.”
Fixed income as foundation once more
The message for wealth managers from Harrison and Hillenbrand is unmistakable: fixed income is no longer just a defensive anchor, it is once again a proactive source of income, diversification and potential outperformance within portfolios.
With fiscal pressures mounting, regulatory reforms reshaping retirement advice, and global growth slowing, the case they make for bonds is powerful. The backdrop of higher starting yields reinforces this view. As Harrison noted earlier, “Historically, starting yields have been a strong predictor of future return potential.”8 In other words, where we stand today, at a point of elevated yields following the global “reset” in interest rates, may create a stronger foundation for investors’ forward-looking return potential.
Yet accessing these opportunities, beyond conventional gilts and corporates, requires the global reach and analytical depth that only a handful of managers can offer.
For PIMCO, this is the moment to demonstrate both its breadth and depth of resources, as well as its renewed commitment to the UK wealth market. As Hillenbrand concludes: “For us, it’s all about seeking consistent and predictable income from fixed income assets, which we believe will be a key priority for wealth managers and advisers. We’re ready to support clients and intermediaries and believe we’re extremely well placed to do so.”
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About Rupert Harrison
Rupert Harrison is a senior advisor to PIMCO’s U.K. portfolio management team. Prior to joining PIMCO in 2025, he spent nine years at BlackRock as a portfolio manager and head of research for the multi-asset strategies group, managing assets across global macro, ESG, and climate strategies. From 2022–2023 he chaired the new Economic Advisory Council to help stabilize the U.K. economy. From 2010–2015 he was chair of the U.K. Council of Economic Advisors and served as chief of staff to Chancellor of the Exchequer George Osborne. Mr. Harrison is a regular commentator on economics, politics, and financial markets in both written and broadcast media, and his academic research has been published in the American Economic Review and the Economic Journal. He has nine years of investment experience and holds a Ph.D. in economics from University College London.
About Simon Hillenbrand
Simon Hillenbrand is an executive vice president in PIMCO’s London office and leads U.K. global wealth management. Prior to joining PIMCO in 2025, he worked as a consultant with PIMCO’s U.K. GWM team. Previously, he worked at Janus Henderson Investors for almost 15 years as head of U.K. retail, responsible for the oversight of distribution across wholesale and retail channels. Prior to this, he worked at New Star Asset Management, most recently as managing director, U.K. retail. He also worked at Invesco as a regional sales manager, and he began his financial services career at Morgan Grenfell Asset Management. He has 29 years of investment and financial services experience and holds a diploma in rural estate management from the Royal Agricultural University in Cirencester, U.K. He also holds the Investment Management Certificate from the Institute of Investment Management and Research, and the Certificate in ESG Investing from the CFA Institute.
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