Asian fixed income is drawing support from a global capital expenditure (capex) boom and a shrinking supply of dollar-denominated bonds, according to Principal Asset Management, whose chief executive also sees investors shifting toward asset-heavy investments backed by contractual cash flows.

Kamal Bhatia, president and chief executive officer of Principal Asset Management, laid out the views in an interview with The Korea Economic Daily (KED Global) on March 30, 2026.

AI capex boom tightens dollar supply

About 85% of AI-related investment is expected to be funded internally this year, according to the firm. With the bulk of artificial intelligence spending financed from companies' own cash flows rather than external borrowing, new dollar bond issuance is set to shrink — a dynamic the firm said is lending support to Asian fixed income.

The supply mechanics are what give the call its weight for credit watchers: when large borrowers self-fund instead of tapping bond markets, the pool of newly issued dollar paper narrows, tightening the backdrop against which existing dollar-denominated credit is assessed.

Asian investment-grade bonds yield close to 5%, the firm noted — a level that offers a concrete income reference point in the lower-return setting Bhatia described.

Shift toward asset-heavy, cash-flow-backed assets

Bhatia said investors should shift toward asset-heavy investments backed by contractual cash flow as years of strong gains in global equities give way to a lower-return world. In that environment, asset-heavy, cash-flow-backed investments are gaining appeal, he added.

The distinction is definitional but consequential: contractual cash flows — income fixed in advance through agreements such as leases — are set by contract rather than by market performance, which is what gives asset-heavy strategies their income-led character.

CRE recovery rewards selectivity

The global commercial real estate (CRE) market has entered a recovery phase, but investors should not expect a synchronized rebound across property types and geographies, according to Principal Asset Management's 2026 outlook. The firm said the CRE recovery rewards selectivity as income drives returns.

That income-first framing links the property view to Bhatia's wider argument, underscoring why the firm anticipates divergence across sectors and regions rather than a broad, uniform upswing.

Non-US markets and digital real estate

Bhatia also flagged strong momentum in non-US markets and digital real estate. In a separate interview with The Korea Economic Daily published on March 25, 2025, he said it was time to shift focus toward non-US markets "after years of stellar performance of US assets driven by the robust world's No. 1 economy."

Both flags extend the same thread running through his remarks: looking past US assets that have already delivered years of outsized gains, toward regions and asset types where income and cash flows are the draw.

For readers tracking the firm's supply argument, the observable markers ahead are the pace of new dollar bond issuance and whether the internally funded pattern behind this year's AI capex holds.

Principal Asset Management is the asset management arm of Principal Financial Group, a US-based provider of retirement and financial services.

Source: KED Global