16 April 2025 3 minute read
Author

Advances in data analytics and AI-driven insights are changing the landscape in fixed income investing, and the pace of change in innovation and technological adoption is remarkable.

Important information
Read this article to understand:
  • How new tools allow for more efficient fixed income decision-making
  • The impact of big data
  • Why human expertise and judgement remain vital  

Visiting the Museum of the Future in Dubai earlier this year was a powerful reminder of how rapidly the world is changing. Designed using AI and built with 3D printing technology, the museum itself is a testament to what’s possible when innovation leads the way. This experience was particularly thought provoking when applied to fixed income markets — a space that has traditionally been slower to embrace technology compared to other asset classes.

Historically, the complexity of fixed income markets and the reliance on legacy systems have held back rapid technological adoption. However, advancements in data analytics and AI-driven insights are changing this landscape. Leveraging these tools isn’t just about efficiency; it’s about enhancing decision-making and building more resilient investment solutions.

The fixed income paradigm shift

Fundamental analysis on fixed income investments has, and will always focus on scrutinising companies, bond ratings, and economic trends. Today, the rise of big data has transformed the potential to augment this approach, integrating massive datasets and complex algorithms to provide precise, real-time insights. These advancements give us a holistic perspective, enabling us to navigate even the most volatile markets with greater agility, accuracy, and speed.

These technologies empower investment teams to make faster, more informed decisions, all while driving efficiency and improving portfolio outcomes.

PwC’s recent Global Artificial Intelligence Study estimated that data-driven strategies could contribute significantly to the global economy by 2030, with the financial sector being one of the most significant beneficiaries. These technologies empower investment teams to make faster, more informed decisions, all while driving efficiency and improving portfolio outcomes.

Data is reshaping every step of the investment process. For instance, in credit analysis, third-party providers and proprietary tools process real-time data from hundreds of sources. This allows for the anticipation of risks and identification of opportunities earlier, boosting both portfolio performance and resilience.

  1. Enhanced decision-making: Data models identify subtle signals that human analysis might overlook, leveraging insights from millions of data points. According to a McKinsey report, 60% of financial services firms already use data analytics to uncover hidden opportunities.
  2. Broader market coverage: Comprehensive data analysis enables monitoring of diverse sectors, spotting opportunities while reducing concentration risks — a critical advantage in today’s complex markets.
  3. Improved risk management: Real-time data feeds allow for early detection of risks — whether from market shifts, poor disclosures, or geopolitical events — enabling proactive portfolio adjustments.

The impact of big data

Data does not just transform investment decisions—it also revolutionises operational processes. Automating time-consuming tasks frees analysts to focus on higher-value work, boosting productivity and job satisfaction. Centralised data systems and trusted vendor partnerships reduce errors, ensuring that insights are built on consistent, high-quality information.

Automating time-consuming tasks frees analysts to focus on higher-value work, boosting productivity and job satisfaction.

A 2023 survey by Deloitte found that financial firms using data automation reported operational efficiency gains of up to 40%. This scalability allows for effective management of unpredictable workloads, enabling strategic growth without the need for proportional increases in headcount.

Beyond the efficiency aspect, data analytics is also transforming macro forecasting by enabling the processing of alternative data sources — such as satellite imagery, supply chain data, and social media trends — alongside traditional economic indicators. For example, during recent market shocks, alternative datasets provided early warnings about supply chain disruptions and consumer behaviour changes. Scenario analysis powered by these tools allows for preparation for multiple outcomes, an agility that is central to fixed-income strategy.

All this comes together to mean that data models enable thousands of real-time simulations to test scenarios and optimise portfolios. Investment-grade sector allocation tools exemplify this capability, allowing for the building of resilient, diversified portfolios better equipped to withstand market volatility. Research by the CFA Institute shows that firms using data-driven portfolio optimisation achieve, on average, 10% higher returns during periods of high market volatility.

However, it is important to note here that data is only as effective as the quality it processes. Ensuring data quality and alignment across systems is essential. Investing in in-house developer expertise and robust data governance functions ensures that data systems produce trusted outcomes.

This rigorous approach not only reduces errors but also ensures compliance with evolving regulatory standards—a critical consideration as data becomes more deeply embedded in financial services.

While data offers a wide range of transformative advantages, it serves best as a complement to human expertise. Analysts’ judgment remains vital.

Moreover, while data offers a wide range of transformative advantages, it serves best as a complement to human expertise. Analysts’ judgment remains vital for interpreting nuanced market conditions and credit profiles that may not align neatly with historical data. By combining data analytics with human insight, potential blind spots are mitigated, ensuring that technology serves as an extension of the team’s capabilities, not a replacement.

Predictive models often reflect historical biases. Analysts’ experience helps account for these factors, ensuring that strategies are both innovative and grounded in sound decision-making principles.

Embracing change with a long-term vision

Reflecting on the evolution of fixed income investing, the pace of change is remarkable. Tools powered by data and technology allow for tackling market uncertainties with clarity and foresight previously unimaginable. Yet, even as these advances are embraced, it is essential to remain grounded in clients’ long-term needs, committed to balancing cutting-edge technology with human insight.

Throughout 2025 and in the years to come the industry must leverage data responsibly and strategically, not only to future-proof fixed income strategies but also to set a benchmark for resilience, innovation, and client value in a rapidly changing world. Just as Dubai’s Museum of the Future embodies a forward-thinking vision and a commitment to innovation, so must our industry evolve and adapt. The future is approaching quickly—let’s make sure we’re prepared.

This article was first published in Portfolio Adviser in March 2025.

Related views

Key risks

Investment and currency risk

The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency and exchange rates. Investors may not get back the original amount invested.

Credit risk

Bond values are affected by changes in interest rates and the bond issuer's creditworthiness. Bonds that offer the potential for a higher income typically have a greater risk of default.

Important information

THIS IS A MARKETING COMMUNICATION

Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable but, has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

The information contained herein is for general guidance only. It is the responsibility of any person or persons in possession of this information to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information contained herein does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation..

In Europe, this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK, this document is issued by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL) for distribution to institutional investors only. Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material. AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act 2001 and is an Exempt Financial Adviser for the purposes of the Financial Advisers Act 2001. Registered Office: 138 Market Street, #05-01 CapitaGreen, Singapore 048946. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.

In Canada and the United States, this material is issued by Aviva Investors Canada Inc. (“AIC”). AIC is registered with the Ontario Securities Commission as a commodity trading manager, exempt market dealer, portfolio manager and investment fund manager. AIC is also registered as an exempt market dealer and portfolio manager in each province and territory of Canada and may also be registered as an investment fund manager in certain other applicable provinces. In the United States, AIC is registered as investment adviser with the U.S. Securities and Exchange Commission, and as commodity trading adviser with the National Futures Association.

The name “Aviva Investors” as used in this material refers to the global organisation of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the UK.