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AI AT THE BOND DESK, NOT IN CHARGE YET

Fixed-income investors have added AI to their toolkits with hedge funds leading adoption, but for now the technology remains more of a sidekick than the big boss making the final call, a Barclays survey found.

The Barclays AI in fixed income report, based on responses from more than 400 buy-side investors in May 2026, examined AI usage among fixed income investors.

Hedge funds lead in adoption, with 72% reporting AI is embedded in day-to-day workflow. Long-only managers and asset owners followed closely at 49% and 38% respectively, according to the survey.

Barclays said the gap likely reflects differences in how these investors operate. Hedge funds tend to run faster, higher-turnover strategies where speed and information processing are critical, while asset owners typically have longer investment horizons and more structured processes.

Long-only investors usually stick to buying assets for steady, benchmark-linked returns, while hedge funds have a wider playbook — including shorting, derivatives, leverage and macro trades — to chase more flexible return targets.

While investors are relying heavily on the technology for tasks such as idea generation, research and decision support, its role in real-time trading and portfolio creation remains limited, according to the Barclays survey.

"This likely reflects both the complexity of bond market structure and the continued importance of human judgment in trading less standardized instruments," Barclays said.

Only about 6% to 10% of investors across all groups used AI for portfolio construction, a relatively small use case. By contrast, research dominated AI usage, accounting for 44% of responses among hedge funds and 52% among both asset owners and long-only asset managers.

Key barriers to AI adoption remain data security and privacy, the survey showed, reflecting broader concerns around protection of sensitive trading data, proprietary models and client information.

Overall, the survey findings point to a "market in transition" where AI is no longer "experimental" but is not yet fully embedded.

For now, AI's role is to provide support to human judgment instead of replacing human intervention in the investment process, Barclays said.

(Kanchana Chakravarty)

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