Haran Karunakaran

The Reserve Bank of Australia’s decision to raise interest rates this week to 4.85 per cent reinforces the case for long-term investors to look beyond cash and consider locking in attractive yields available in global fixed income markets, according to Capital Group.

Haran Karunakaran, Investment Director, Australia at Capital Group, said investors with a medium-to-long-term horizon risk missing opportunities by focusing too heavily on the timing of interest rate movements.

“The debate around fixed income is often framed too narrowly around when central banks will start cutting rates. But long-term investors don’t necessarily need rate cuts to benefit from bonds.

“If markets are pricing in multiple rate hikes, the bar is lower than that. Central banks just need to hike fewer times than anticipated for bond yields to fall, generating capital gains for investors. And along the way, investors can earn attractive levels of income.”

This has been the case for US bonds in recent weeks, with markets at points pricing nearly 4 rate hikes

Karunakaran said global bond markets were offering compelling opportunities, with several markets already priced for hawkish hiking cycles as well as offering attractive yields. Broad global credit for example yields approximately 7.5 per cent on an Australian dollar-hedged basis

“For long-term investors, the opportunity is to lock in attractive yields today rather than attempt to pick the turning point in monetary policy.

“For example, in the final quarter of 2023, global corporate bonds returned around 9.5 per cent as interest rate expectations shifted sharply. It was a powerful reminder of how quickly bond markets can reprice and how difficult it is to time duration exposure.”

Capital Group believes moderate duration of around four to six years offers an attractive balance between income generation and potential capital appreciation.

“This isn’t a call to maximise duration or make an aggressive bet on interest rate cuts. It’s about holding enough duration to benefit if bond yields decline, while earning attractive income if rates remain elevated.

“Fixed-rate corporate bonds are particularly interesting because they combine duration exposure with additional yield from credit spreads, providing an income buffer against interest rate volatility”, he said.

For investors with a medium-to-long-term horizon, remaining heavily allocated to cash or very short-dated credit carries its own risk.

“The opportunity is significant now, to secure attractive income for the years ahead and build a diversified fixed income portfolio capable of delivering returns across different interest rate environments.”

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Key takeaways

• AI represents a major investment cycle with distinctive financial foundations. Unlike earlier infrastructure booms, much of the AI build-out is supported by substantial hyperscaler operating cash flows rather than primarily by debt. Semiconductor supply, electricity grid access and project level execution may constrain speculative expansion. Nevertheless, accelerating capital expenditure and the relatively short ‘useful’ lives of computing equipment warrant scrutiny.
• Credit risks differ sharply across borrowers and structures. Senior hyperscaler bonds, data centre project finance, equipment-backed transactions and leveraged cloud providers offer different exposures to construction, tenant, refinancing and demand risks. Assessing repayment sources and contractual protections is essential; additional yield may not adequately compensate for weaker structures.
• The next two to three years will test the financing case. The critical indicators are enterprise adoption, AI-related revenues, hyperscaler cash flows, infrastructure availability and debt issuance. These should provide clearer evidence of financial sustainability, even as the broader effects on productivity, businesses and employment take longer to materialise.

The AI infrastructure expansion is creating opportunities across investment grade, high-yield and structured credit markets.

For bond investors, the central question is whether borrowers and their financing arrangements can generate dependable cash flows to service debt through the investment cycle.

How does the AI infrastructure boom compare with previous investment cycles?

The financing mix is a key distinction. To take one historical example, the expansion of the railroads in the US during the 19th century was more than 75%¹ funded through debt. The current AI build-out remains substantially supported by the operating cash flows of major hyperscalers.

Although accelerating capital expenditure is compressing free cash flow and could push some companies into negative territory, underlying operating cash generation remains substantial.

Asset lives also differ. Railroad infrastructure may operate for decades, whereas graphics processing units (GPUs) are typically depreciated over a much shorter, single-digit number of years, although assumptions vary. Semiconductor availability, power access and regulatory constraints also limit the pace of expansion.

Previous cycles nevertheless demonstrate the risks of rapidly expanding debt funded capacity, including the 2015–16 correction in energy credit. The expansion of new financing structures also warrants scrutiny as underwriting practices and rating methodologies evolve alongside the market.

AI-related borrowing could become a major component of high-yield issuance within two to three years. However, building capacity is more difficult than in some previous cycles, and credit investors are assessing links to hyperscaler balance sheets and contractual support at an early stage. The banking system is also less leveraged than before the global financial crisis.

Where could AI disruption create the greatest credit risks?

Software, business process outsourcing and IT services face potential disruption, given AI could reduce barriers to software development and challenge business models based on charging for labour.

However, providers of mission-critical systems may be more resilient because switching is costly, while simpler services could face greater competition.

Against this backdrop, credit analysis must consider whether management teams are adapting their products and operating models.

Long-dated investment-grade bonds introduce an additional challenge: assessing competitive positions and creditworthiness over several decades becomes more uncertain during rapid technological change.

How should investors assess hyperscaler commitments and off-balance-sheet financing?

The nature and duration of each obligation are important. Future equipment purchases are more flexible than long-term data centre leases.

A data centre equipped with NVIDIA GPUs represents an investment of tens of billions of US dollars. The powered building and related infrastructure account for a substantial minority of the cost, but the majority is typically attributable to computing equipment.

If demand moderates, hyperscalers may be able to reduce GPU purchases more quickly than lease obligations. Lower capital expenditure could therefore support free cash flow, even where lease commitments remain.

Where are the main opportunities and risks across credit markets?

Senior unsecured hyperscaler bonds provide exposure to diversified businesses and established revenue streams rather than a single project.

However, special-purpose vehicles financing data centres may depend on a hyperscaler tenant or other contractual support, while equipment-backed transactions introduce different asset and maturity risks. The source and enforceability of repayment cash flows are therefore central to security selection.

AI-related issuance is also expanding in high yield, particularly through data centre construction projects intended to be refinanced once facilities are operational, powered and leased.

Given these considerations, underwriting should assess construction execution, electricity availability, tenant strength and refinancing assumptions.

Highly leveraged neocloud providers, represent a different risk profile from projects supported by investment-grade tenants. Their relatively high financing costs reflect concerns around leverage, future demand and the sustainability of their business models.

What could trigger a deterioration in AI-related credit?

A material weakening in hyperscaler financial strength or a reassessment of long-term AI demand would have broader implications than the failure of an individual project. Many high-yield financing structures ultimately rely on hyperscaler leases or commitments.

Refinancing risk also depends on transaction design. A project with a long-term investment-grade lease may be capable of repaying debt from contractual cash flows without relying on a favourable refinancing market.

Diversified hyperscalers are not necessarily dependent on any single AI model succeeding. Their infrastructure can support multiple customers and applications.

Consensus estimates indicate that the five largest hyperscalers could generate approximately US$6 trillion in aggregate operating cash flow over the five years to 2030. A slowdown in capital expenditure could also improve free cash flow and reduce borrowing requirements, although outcomes will differ across issuers.

Which indicators will be most important over the next two to three years?

Looking ahead, a central indicator is whether greater computing capacity and model training continue to improve AI capabilities and translate into commercial applications, enterprise demand and revenue.

Investors should also assess the balance between supply and demand. Excess capacity could place pressure on pricing, while electricity shortages and lengthy grid connection queues may constrain growth.

Further, enterprise monetisation and the financial health of the AI ecosystem will also be critical indicators of long-term viability.

The ability of major AI developers to access public equity and investment-grade credit markets could also provide useful evidence of the financial health and maturity of the wider AI ecosystem.

Ultimately, the next two to three years should clarify the sustainability of infrastructure financing, although the wider effects on employment and productivity may take a decade or more to emerge.

Could AI debt issuance become too concentrated in investment-grade markets?

Increased bond issuance by hyperscalers could raise their weighting in investment-grade indices, although this is not currently considered a significant concern for market access or financing capacity.

The potential returns from AI investment may justify higher borrowing costs. Even a 100-basis point increase in funding costs may not materially deter major hyperscalers from raising capital to support infrastructure expansion.

Stronger-than-expected operating cash flows could also moderate future issuance requirements, particularly if AI investments begin generating returns sooner than anticipated.

What are the implications for structured credit and private markets?

The repayment profile is decisive. Some investment-grade data centre structures are designed to amortise through contractual lease payments, while certain asset-backed transactions retain exposure to residual asset values at maturity.

Location, power availability, construction status, alternative uses and tenant quality all affect recoveries. Analysis should consider the borrower’s full obligations across parent bonds, subsidiaries and equipment-backed financing.

When it comes to private AI infrastructure financing, this should be distinguished from conventional direct lending to leveraged software businesses, which may be more vulnerable to disruption and refinancing pressure. Some infrastructure transactions resemble investment-grade credit and may suit long-term investors.

Across public and private markets, the essential tests remain the same: the identity and financial strength of the repayment counterparty, contractual protection and whether expected returns adequately compensate for risk.

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References:
[1] Source: Liaquat Ahamed, https://fortune.com/2026/06/02/ai-bubble-history-railroad-crash-1873-pulitzer-liaquat-ahamed/

Statements attributed to an individual represent the opinions of that individual as of the date published and may not necessarily reflect the view of Capital Group or its affiliates. This communication is intended for the internal and confidential use of the recipient and not for onward transmission to any other third party. This communication is of a general nature, and not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities. All information is as at the date indicated and attributed to Capital Group unless otherwise stated. While Capital Group uses reasonable efforts to obtain information from third-party sources that it believes to be accurate, this cannot be guaranteed. In Australia, this communication is issued by Capital Group Investment Management Limited (ACN 164 174 501 AFSL No. 443 118), a member of Capital Group, located at Suite 4201, Level 42 Gateway, 1 Macquarie Place, Sydney, NSW 2000 Australia. All Capital Group trademarks are owned by The Capital Group Companies, Inc. or an affiliated company. All other company names mentioned are the property of their respective companies. © 2026 Capital Group. All rights reserved.

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In the broader Asia Pacific region, the use of professional advice and digital platforms by Gen Z inheritors is widespread.

New research^[1] from Capital Group reveals a confidence gap at the heart of the Great Wealth Transfer, with many inheritors making major financial decisions before they feel ready. While 91% made their first significant financial decision within three months of receiving an inheritance, only 18% felt very comfortable doing so in the first few weeks. The findings highlight the role of trusted financial advice to help inheritors navigate immediate choices and build a long-term plan for their wealth.

Guy Henriques, President, Europe and Asia-Pacific Client Group at Capital Group, said: “Receiving an inheritance often brings immediate financial, legal and administrative decisions, before many inheritors have had time to decide what they want that wealth to achieve. Our research shows that this pressure can lead to missed opportunities, with many wishing they had invested more of their inheritance.”

Jorden Brown, Head of Client Group for Australia, added: “Trusted financial advice can make a real difference — helping inheritors simplify complexity, make confident decisions and build a long-term investment plan. At Capital Group, we partner with wealth managers and financial advisers by providing the investment insights and long-term perspective needed to support the next generation of inheritors.”

The research revealed that in the broader Asia Pacific region, which includes Australia, the use of professional advice (92% in APAC vs 90% globally) and digital platforms (68% vs 67% globally) by Gen Z inheritors is widespread and they are even more likely than Gen Z inheritors globally to have found a new adviser when they inherited (66% vs 54%).

In Australia specifically, the study revealed that the investment priorities of inheritors tilt toward financial returns, and women rely heavily on digital platforms for advice.

Key findings from Capital Group’s research

Inheritors are acting before they feel ready

• 91% of inheritors made their first significant financial decision within three months of receiving their inheritance. For 43%, important decisions happened within weeks, despite only 18% feeling very comfortable with their choices.
• Only 19% are fully happy with how they used their inheritance. 60% wish they had invested more in securities or retirement accounts.
• Nearly half (49%) cite too many options or conflicting advice as among the biggest challenges they face when managing inherited wealth.
• Australian inheritors move faster than the global average, but are less likely to act fully on advice, with 77% of respondents saying early professional advice shaped how they used and invested their inheritance (vs 70% globally). This may lead to quicker decisions but not higher follow-through, as 52% (vs 43% globally) made their first significant decision within days or weeks, but only 37% acted fully on the advice they received (vs 48% globally).

Trusted advice builds confidence, but action lags

• 78% say an existing adviser relationship was the most valuable factor when they inherited, and 70% say early professional advice shaped how they used and invested their wealth.
• 88% say working with an adviser made them feel emotionally supported, not just financially advised.
• Yet less than half of inheritors (48%) say they acted fully on the advice they received, falling to 42% among women. 
• Returns carry greater weight with Australian inheritors, with portfolios showing a stronger private-markets focus. 68% rank generating strong financial returns among their top three priorities (vs 57% globally). Australians are also more likely to invest inherited wealth in private equity/debt or private-market funds (37% vs 25% globally).

Women and Gen Z are reshaping inheritance decisions

• Women are more likely than men to complement professional financial advice with digital platforms or robo-advisers (73% vs. 62% for men), friends or family (78% vs. 68%) and AI tools to generate ideas and test options (69% vs. 56%).
• More than half (54%) of Gen Z inheritors found a new adviser who felt like the right fit after inheriting, compared with 38% of Gen X and 28% of Baby Boomers.
• Nearly a quarter (24%) of Gen Z invest solely for financial returns, compared with 11% of Gen X and 5% of Baby Boomers.
• Australian women lean heavily on digital advice amid “analysis paralysis”. 67% of Australian women (vs 55% of women globally) cite too many options or conflicting advice as a top challenge that they face when they inherit. Confidence to act is more likely to be driven by an adviser’s credentials and experience (57% vs 34% globally), and nearly all Australian women (93%) used a digital platform (vs 73% globally).

Read the report.

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Notes:
[1] The Capital Group study was conducted by Financial Times Longitude in April and May 2026. The study surveyed 1,200 high-net-worth and ultra-high-net-worth individuals to find out how they manage their inherited wealth. Respondents were based in North America, Europe and Asia-Pacific. They had a minimum net worth of $1 million, investable assets of between $250,000 and $10 million, and reported inheritances of between $100,000 and $100 million. All currency in US$.

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Mike Gitlin

Capital Group, one of the world’s largest and most experienced active investment managers with US$3.6 trillion^[1] of assets under management, announced today that it has secured a Financial Services Permission from the Financial Services Regulatory Authority (FSRA) of ADGM, the international financial centre of Abu Dhabi, the Capital of the United Arab Emirates, enabling the firm to operate as a regulated investment manager. The approval authorises Capital Group^[2] to conduct trading, investment management and distribution activities within ADGM.

The regulatory milestone marks the next phase of Capital Group’s long-term commitment to the region, following its May 2026 announcement of plans to establish its first Middle East office in Abu Dhabi. The firm has since relocated associates from North America, Europe and Asia, bringing investment, operational and client-facing expertise closer to clients and opportunities in the region. Its local presence is expected to grow over time, in line with business and client needs.

Benno Klingenberg-Timm, Head of Abu Dhabi Office and Head of Institutional for Europe and Asia, Capital Group, said: “Establishing a regulated presence in Abu Dhabi brings us closer to our clients and to the investment opportunities across the Middle East, a region where we have been active for many years. From day one, we will have a meaningful presence, with on-the-ground investment, operational and client-facing capabilities. Much like the opening of our Singapore office in 1989, we’re bringing together the full breadth of Capital Group’s expertise in Abu Dhabi, reflecting our confidence in the region’s long-term growth.”

H.E. Ahmed Jasim Al Zaabi, Chairman of ADGM, said: “We are pleased to welcome Capital Group, a global investment manager, as it establishes a presence in Abu Dhabi. Its decision reflects the strength of Abu Dhabi’s financial ecosystem and ADGM’s growing position as a leading international financial centre for global institutions seeking long-term opportunities across the region.”

Mike Gitlin, President and CEO of Capital Group, said: “The Middle East is strategically important to Capital Group and our clients. Securing our regulatory licence in Abu Dhabi reflects our long-term commitment to the region and our conviction in its continued development as a leading international financial centre. We look forward to deepening our relationships with clients and partners.”

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Notes:
[1] Data as of June 30, 2026. Source: Capital Group
[2] Capital Group Investment Management Co Ltd.

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The structure of local currency emerging market debt creates opportunities for active managers to add value through selection, flexibility and disciplined risk management.

Key takeaways

• A large, diverse and fast-growing opportunity set: local currency EMD spans economies at very different points in the cycle, offering income, growth and genuine diversification.
• Structure, not just yield, rewards active management: wide dispersion, independent return drivers and index mechanics create levers a passive approach cannot pull.
• Avoiding the wrong risks matters as much as picking the right bonds: separable rate and currency risk make disciplined risk control central to long-term returns.

Local currency emerging market debt (EMD) has matured into one of the most diverse opportunity sets in global fixed income. Issuance has grown, liquidity has deepened, yield curves have developed, and the ownership base has broadened across domestic and international investors. For many emerging economies, a functioning local bond market and credible monetary policy are now signals of economic development rather than aspirations.

For many investors, the question is no longer whether local currency EMD merits an allocation, but how best to capture it. A passive or smart beta approach offers a low-cost entry point, but it also embeds a series of decisions that many investors may not fully appreciate. In our view, the structural characteristics of this asset class, namely its breadth, heterogeneity and multiple sources of return, create conditions in which specialist active management is particularly well placed to add value.

The scale of the market underlines how much is at stake. The widely followed JPMorgan GBI-EM Global Diversified Index represents around US$2.8 trillion, compared with approximately US$16.6 trillion of tradable local currency government debt. In other words, the benchmark captures less than 17% of the broader market. A substantial opportunity set therefore sits outside the standard benchmark from the outset. This paper sets out four structural features of the market that, taken together, make the case for an active approach.

1. Dispersion: local currency EMD is not one market

The single most important feature of this asset class is that it is not homogeneous. Beneath the label of emerging market debt sits a collection of economies at very different stages of the cycle, facing very different pressures.

Inflation trajectories differ, and growth paths, fiscal positions, external balances and political circumstances vary widely from one country to the next. A bond investor positioned in one market is often facing an entirely different opportunity from one positioned elsewhere. This dispersion is not a footnote; it is the foundation of the active case. The wider the differences between countries, the greater the potential for a manager who researches those countries deeply to distinguish between them and allocate accordingly.

Nowhere is that divergence more visible than in monetary policy, where emerging market central banks are frequently moving in opposite directions at the very same time. In the most recent cycle, the synchronised easing of prior years gave way to sharp divergence: some EM central banks continued to cut cautiously as inflation receded, many moved to the sidelines as a renewed energy-price shock clouded the outlook, and a few tilted back towards tightening, leaving policy rates moving in different directions across the asset class. A single aggregate benchmark return conceals exactly this kind of variation. For a passive investor, that dispersion is simply absorbed; for an active investor, it is the raw material of alpha.

2. Benchmarks reflect eligibility, not opportunity

A benchmark is a useful tool, providing a reference point for risk, enabling comparison across managers and supporting manager selection. We are benchmark-aware for exactly these reasons. But a benchmark is also a simplification and the choices embedded in that simplification carry real consequences. Index providers must prioritise liquidity, transparency and operational simplicity. The result is a benchmark that reflects what is eligible for inclusion, not the full set of what is investable.

The starting point for most local currency EMD benchmarks is the level of sovereign debt outstanding, so exposure tilts towards the most indebted issuers. The widely used JPMorgan GBI-EM Global Diversified Index mitigates this through a 10% country cap, but that cap is itself an active decision. So too are the index’s other construction rules, which exclude a large part of the investable universe:

• Countries with capital controls or restricted market access
• Instruments outside defined maturity thresholds (at least 2.5 years to enter the index, and at least six months to remain in it)
• Issues below a minimum size (US$1 billion for onshore local bonds, US$500 million for offshore)
• Inflation-linked, callable, puttable or convertible structures
• Corporate and quasi-sovereign issuance

These eligibility rules materially narrow the opportunity set represented by the benchmark. Corporate and quasi-sovereign issuance, smaller or shorter-dated securities, and certain markets with access restrictions are excluded by construction, meaning the benchmark reflects only a subset of the broader local currency debt universe.

The consequences are not neutral. The methodology reshapes regional and country exposures in ways an investor may not intend. The diversification and capping rules, for example, pull the index’s regional mix away from the underlying market: Asia accounts for close to 80% of the broader local currency universe but under half of the Global Diversified index, while Latin America’s share rises correspondingly. Given Asia’s lower yield of around 2.5% versus close to 10.1% in Latin America, that methodological choice effectively raises both the yield and the risk of the benchmark. In other words, a passive allocation is not as passive as it appears.

Index construction also shapes market behaviour in ways passive strategies must follow and active managers can use. Four mechanical effects recur regardless of which country happens to be topical in any given year:

• Weights reflect issuance, not fundamentals. Large, benchmark-eligible issuance mechanically increases index weight even when valuations are stretched, while smaller or shorter-dated issuance from sound borrowers can be excluded entirely.
• Mechanical exclusions reduce flexibility. Rules-based exclusions keep whole segments out of the index by construction. This does not mean an active manager seeks distressed exposure; rather, it can engage earlier, avoid forced selling, and assess stressed situations on their merits where recovery values or reform paths are credible.
• Forced turnover creates predictable flows. Bonds drop out as they approach maturity and new issues enter automatically once eligible, so passive portfolios must trade around these events irrespective of valuation.
• Diversification caps mask underlying risks. Redistribution rules shift weight between issuers without regard to liquidity or credit quality. An active manager can calibrate these exposures deliberately rather than mechanically.

The conclusion for investors is subtle but important. Choosing a benchmark, and choosing to track it, is itself an active decision about future beta. An active manager, by contrast, can treat the benchmark as a reference rather than a constraint, and can access the broader opportunity set beyond it, including the off-benchmark securities where inefficiencies are often greatest.

3. Returns come from multiple, independent sources

Local currency EMD is unusual within fixed income in offering several distinct drivers of return. Total return reflects duration, yield curve positioning, carry, currency and, at times, liquidity, and these do not always move together. In recent years, the bond and currency components of the market have at times diverged meaningfully.

This matters because it multiplies the ways in which an active manager can express a view. A manager can take duration risk in one market while hedging its currency, position along the curve in another, and hold an off-benchmark position in a third. Each of these is a distinct lever, and liquidity conditions themselves can be a further one, offering entry and exit points that passive strategies, bound to trade around index events, cannot choose. The concentration of returns underlines the point: in 2025, South Africa, Mexico and Indonesia together contributed over 45% of the index’s return, a reminder that headline returns often rest on a handful of markets. An active manager can choose whether to lean into or away from that concentration; a passive investor simply inherits it.

These drivers are not merely numerous, they are genuinely independent, which is what makes them valuable within a broader portfolio. Because local currency returns are driven primarily by domestic interest rates, inflation dynamics and country-specific policy rather than global credit cycles, the asset class has historically shown only moderate correlation with US high yield, in the region of 0.5 to 0.6.

That domestic anchor is visible in the ownership base itself: across the major local currency markets, the share held by foreign investors has trended lower over the past decade, leaving returns driven more by local policy and local flows than by global risk sentiment. This is part of what makes the diversification genuine rather than incidental.

Currency deserves particular attention. It can be a significant contributor to, or detractor from, total return, and over long periods, emerging market currencies have tended to depreciate against developed market peers. Yet valuations move in cycles, and periods of currency weakness can create the conditions for future appreciation. Capturing that potential requires active selection rather than passive exposure to the basket as a whole.

4. Structural inefficiencies and deliberate risk management

The rules that govern index membership are themselves a source of opportunity. Benchmark composition changes on a fixed schedule; fundamentals do not. That mismatch forces passive capital to move mechanically, creating dislocations between price and fair value that an active manager can anticipate.

This pattern is more durable than any single event. Whenever a market is added to or removed from a major index, or the rules governing index weights change, the staged rebalancing reshapes capital flows and pricing over a defined window, well ahead of any change in fundamentals. A recent illustration: JP Morgan’s 2025 review lowered the GBI-EM country cap from 10% to 9% over a five-month phase-in during 2026, and set Paraguay, Saudi Arabia and the Philippines on a path towards inclusion, changes that move benchmark weights on a fixed schedule rather than in response to value. Anticipating such technical events can offer a positioning advantage that passive strategies, by design, cannot pursue.

What matters is the mechanism, not any particular episode. Forced, calendar driven flows are predictable in direction if not always in magnitude, and a manager positioned ahead of them is being paid for foresight that the benchmark cannot exercise on its own behalf.

Anticipating opportunities, however, is only half of the active manager’s task. The other half is deciding which risks to accept in the first place. A common misconception is that the return potential of local currency EMD is simply a function of taking more risk. In our experience the opposite discipline is what distinguishes strong long-term outcomes: the task is not to maximise risk but to decide which risks are worth taking, which should be hedged, and which should be avoided entirely.

Because duration and currency risk can be separated and managed independently, an active manager has genuine control over the risk profile of a portfolio through changing volatility regimes. Interest rate and exchange rate volatility can be high at times, and the ability to dial exposures up or down, rather than remaining fully exposed to whatever the benchmark dictates, is a meaningful advantage. It also allows a manager to selectively hedge currency where depreciation risk dominates or carry is unattractive, and to add exposure where valuations, external balances and policy credibility support appreciation. Managing volatility carefully across both rate and currency risk is, in our view, as important to long-term results as security selection itself.

What it takes, and how we approach it

The opportunities described above are not available simply because a manager is active. They depend on capabilities that are demanding to build and harder still to integrate: specialised research that can tell one economy from another, the operational reach to hold positions the benchmark excludes, the combined rates and currency expertise to work each return driver independently, and a risk function with the standing to shape exposures rather than merely report them.

Our own approach is organised around those requirements. Emerging market debt is covered by dedicated sovereign and corporate analysts, macroeconomists and a currency strategist rather than generalists, so dispersion between countries is researched at the level at which it actually occurs. A specialist team assesses market mechanics and counterparty access across more than 75 markets, which is frequently what determines whether an off-benchmark opportunity is genuinely investable rather than merely attractive on paper. And a dedicated risk team engages with portfolio managers on a regular cadence, working from frameworks tailored to each portfolio rather than applied uniformly.

The structural features of local currency EMD, its dispersion, the simplifications embedded in its benchmarks, its multiple sources of return, and the inefficiencies and risks created by its own mechanics, are precisely the conditions in which we believe specialist active management can add the greatest value.

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Statements attributed to an individual represent the opinions of that individual as of the date published and may not necessarily reflect the view of Capital Group or its affiliates. This communication is intended for the internal and confidential use of the recipient and not for onward transmission to any other third party. This communication is of a general nature, and not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities. All information is as at the date indicated and attributed to Capital Group unless otherwise stated. While Capital Group uses reasonable efforts to obtain information from third-party sources that it believes to be accurate, this cannot be guaranteed.  In Australia, this communication is issued by Capital Group Investment Management Limited (ACN 164 174 501 AFSL No. 443 118), a member of Capital Group, located at Suite 4201, Level 42 Gateway, 1 Macquarie Place, Sydney, NSW 2000 Australia. All Capital Group trademarks are owned by The Capital Group Companies, Inc. or an affiliated company. All other company names mentioned are the property of their respective companies. © 2026 Capital Group. All rights reserved.

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SpaceX CEO Elon Musk characteristically fanned the flames, declaring that SpaceX will someday shuttle private citizens to the moon, Mars and beyond. The IPO quickly became the largest in history. With dreams of making money in a galaxy far, far away — or at least beyond earth’s atmosphere — investors also poured capital into a host of space-related ETFs.

Sceptics couldn’t be blamed for having doubts about tourism on Mars. But the space economy is no Jedi mind trick. It’s already generating real-world opportunities for astute investors.

“It would be a mistake to write this off as science fiction,” says Michael Beckwith, equity portfolio manager. “The declining cost of getting into orbit will expand some businesses and open doors to others that were unimaginable a couple years ago. Some will materialise quickly; others will take much longer.”

The question for investors: how do you distinguish between mere fantasy and tangible opportunities that can generate value before the next time Halley’s Comet next flashes by?

Here are six opportunities for investing in the space economy.

1. Space is not one, but many markets

Space is not a single market, but a constellation of existing and potential markets.

The gateway to these opportunities is a space travel ecosystem that starts with rocket manufacturing and launch but also includes ground infrastructure and satellite development. This layer of infrastructure serves as a doorway to other businesses, such as satellite communications, Earth observation, logistics, navigation and defence systems.

“Most of the revenue opportunities are in these downstream businesses, not in launch,” explains equity analyst Andrei Muresianu, who covers US telecom, cable and media companies.

Further cost reductions in launch make other businesses feasible, including the placement of AI data centres in space, which could happen in the next five to 10 years. Further down the road, companies are also exploring the potential for zero-gravity manufacturing, space travel and mining.

“Space may be like The New World when Europe explored it 500 years ago,” Muresianu adds. “First there was extraction and one-way trade, then colonisation, manufacturing and eventually a self-sustaining society.”

In total, space represents a $630 billion economy and is expected to grow to $1.8 trillion by 2035, according to the World Economic Forum.

2. Launch costs are plummeting

Once rare and costly, rocket launches are now routine. SpaceX, which launched its 100^th mission of 2026 in August, has dominated launch, accounting for 90% of the total payload taken into orbit, up from about 5% a decade ago.

State-sponsored efforts in China rank a distant second globally in terms of launch payloads. Other companies that have active launch programs include Rocket Lab, United Launch Alliance (ULA), Relativity Space and Blue Origin.

SpaceX has come to dominate the launch business by  making rockets partly reusable. This breakthrough and other advances drove down the cost to reach low Earth orbit from $54,000 per kilogram in the days of the Space Shuttle to $2,700 per kilogram today. This kickstarted commercial opportunities previously economically unfeasible and spawned dozens of new companies.

SpaceX is now testing its next generation rocket, Starship, a fully reusable orbital launch system capable of carrying as much as 100 to 150 metric tons to low Earth orbit, versus about 23 tons for today’s Falcon 9 rocket.

“Starship could be the railroad to the next space economy,” Muresianu says.

3. AI in space is no longer science fiction

The pieces are already in place for orbital data centres to move from the realm of science fiction to reality.

Early demonstrations have already shown that graphic processing units and other hardware can operate in orbit. And companies are beginning to test space-based inferencing and edge computing. To be sure, data centres in space still face challenges, including latency to Earth and the possible effects of radiation. But the key to making them commercially viable is driving down the launch cost.

“Today’s economics make it difficult to launch large networks into space, but if Starship achieves its cost targets and payload capacity, orbital data centres could become a new layer of AI infrastructure,” Beckwith adds. “And space-based systems offer potential advantages compared with earthbound data centres.”

Data centres on Earth are becoming increasingly expensive as hyperscalers run into bottlenecks in the form of scarce land, power and cooling resources. They also face growing opposition from elected officials and local populations.

“In space, data centres could have access to abundant solar power, avoid competition for water and land and face no community resistance,” says equity investment analyst Zach Alexander, who covers the US aerospace and defence industries.

4. Satellite service is coming to your smartphone

Satellite connectivity has already emerged as one of the most promising growth markets in telecommunications. With more than 6,000 satellites in low Earth orbit, SpaceX’s Starlink dominates the sector. Other providers include Amazon Leo (formerly Project Kuiper), AST SpaceMobile and OneWeb. These networks are well suited to providing broadband service to rural regions, aircraft, ships and developing markets where infrastructure is expensive or impractical, but they are less competitive in more populous markets with extensive infrastructure.

Today satellite networks represent only a fraction of the multibillion-dollar global broadband market. However, declining launch costs and advances in satellite development could help these companies expand their market share.

“Satellite broadband is already scaling rapidly and could become a roughly $40 billion market by 2030,” Muresianu says. “But the game changer for satellite communications companies is direct-to-device (D2D) services that allow ordinary smartphones to connect directly to satellites.”

D2D connectivity is still early in its development, with commercial deployments only beginning. As next-generation satellite constellations improve capacity, speed and coverage, satellite operators could capture a growing share of both the broadband and wireless markets.

5. National security priorities will boost the space economy

Not since the Cold War has geopolitical competition been so focused on the stars.

The US, China and other governments increasingly view space-based defense systems as critical to national security. “It could very well be the key battlefield between superpowers,” Alexander says.

In the US, NASA has long-term plans to build a new space station and a permanent base on the Moon. And in August, SpaceX launched NASA’s $4 billion Nancy Grace Roman Space Telescope into orbit for cosmic exploration.  Separately, the US Space Force is seeking to double its budget to $70 billion in its fiscal 2027. Much will be invested in satellite communications, intelligence gathering, surveillance and navigation systems.

President Trump has also identified the Golden Dome missile defense system as a key priority for the remainder of his term. Golden Dome plans include upgrading missile tracking and response capabilities to respond to advanced hypersonic missiles and other threats.

“The system is expected to rely heavily on space-based sensors, communications networks and potentially orbital interceptors,” Alexander says. “This effort will involve a number of companies, including most major defence contractors.”

For example, in July the Space Development Agency awarded L3Harris a $955 million contract to build 18 missile-tracking satellites equipped with infrared sensors to detect and track hypersonic and ballistic missiles. Lockheed Martin, Northrop Grumman and RTX are among the companies developing space-based missile interceptors.

6. Space manufacturing and travel are not out of the question

Zero-gravity manufacturing of cancer treatments and flights from San Francisco to Tokyo in under 45 minutes may sound outlandish, but as launch costs fall even further and orbit becomes more routine, they become more feasible. And space offers unique physical conditions that cannot be replicated on Earth.

“Space has no dust or rain, heat radiates away, energy is free and unlimited and waste disposal is a minimal expense,” Muresianu explains. “Microgravity changes how crystals form and fluid moves, transforming the way chips, fibre and pharmaceuticals are made, to name a few examples.”

But don’t expect these developments to take place in the next five or 10 years, Muresianu concludes. “I think it’s more realistic to think of these as opportunities in 10 to 30 years.”

By Zach Alexander, equity investment analyst, Michael Beckwith, equity portfolio manager & Andrei Muresianu is an equity investment analyst.

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Alexandra Haggard

Companies worldwide paid a record US$827.3 billion in dividends in the second quarter of 2026, up 7.9% from a year earlier, according to the latest Dividend Watch, part of the Capital Group Global Equity Study^[1]. Core growth, which adjusts for exchange rates, special dividends and other technical factors, was 7.5%, ahead of forecast.

The second quarter is the seasonal high point for global dividends and dividends paid in Q2 2026 alone were larger than the entire annual total as recently as 2011. Growth was also broad-based, with 88% of companies globally increasing dividends or holding them steady, with median growth of 6.0%.

Alexandra Haggard, Head of Product, Europe & Asia at Capital Group, said: “Global dividends accelerated in the second quarter of 2026, with strong growth across most regions and sectors and large increases from some of the world’s biggest companies. The AI boom is no longer just driving markets and boosting share prices. It is now also helping to drive record cash returns for shareholders globally. Active managers like Capital Group are well placed to identify companies across sectors and regions sharing in stronger earnings growth, resulting in record dividend payouts.  In this uncertain environment, active management can help uncover resilient dividend-paying companies that offer investors a dependable source of income, while still participating in long-term corporate growth.”

Sector trends

The fastest growth came from the technology sector, where core payouts rose 26.3% year-on-year in Q2. The AI boom is driving strong profit growth across the global semiconductor supply chain which is feeding into shareholder payouts, with half the sector’s increase coming from the global leader in the US. Technology is on track to become the second-largest dividend-paying sector after financials in 2026 for the first time.

Financials remain the dominant dividend-paying sector for now, by a large margin. Firms raised payouts by US$26 billion (+10.1%) and made the most significant contribution to Q2’s record. Meanwhile, the mining recovery gathered pace with payouts up 15.1%.

Regional trends

Australian companies paid a total of US$5.6bn (A$8bn) in Q2 2026, representing topline growth of 20.1% and core growth of 8.2% on the prior comparative period. Q2 is dividend low season in Australia with just a handful of companies in our index paying a dividend. The largest contributors to our index in Australia included mining groups, financial sector groups and global biotech and biopharmaceutical groups. A stronger Australian dollar helped boost the aggregate topline growth rate.

Geographically, Japan and the wider Pacific region delivered the strongest dividend growth globally, supported by improving corporate profitability, governance reforms and continued shareholder-focus among listed companies.

Q2 marks the seasonal high point for dividends in Europe, accounting for 36% of total dividends paid in the quarter (compared to 21% over the full year). Modest core growth of 3.6% was held back by cuts in the automotive sector, but robust payouts from banks and financial institutions helped offset this weakness, as the sector’s strong recovery increasingly supports European shareholder income.

The U.S. delivered robust growth with core growth reaching 8.7%, while emerging market growth lagged at 4.7%, mainly owing to reductions in the Middle East.

Outlook

The outlook remains positive. Capital Group has upgraded its 2026 global dividend projection to US$2.23 trillion (from US$2.20 trillion), representing topline growth of 6.4% and core growth of 6.0% (up from 4.7%). The main drivers of the upgrade includes stronger-than-expected special dividends, a weaker US dollar and the changed dividend policy of a large U.S. semiconductor company.

Read the report.

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Shannon Ward

The global high-yield bond market is undergoing a fundamental shift in credit quality that has left its former “junk bond” reputation increasingly disconnected from reality, according to Capital Group fixed income portfolio manager Shannon Ward.

Ms Ward, who has invested in high-yield markets for three decades, said the quality of the market was the highest she had seen, with around 55% of the high-yield universe now rated BB – the highest sub-investment-grade rating – and only around 10% sitting in the lowest CCC category.

“In all my time investing in high yield, I have never seen this market with a higher quality than it has today,” she said.

“Most of the market is now double-B rated and almost investment grade, while there is very little exposure to triple-C.”

This shift is challenging traditional perceptions of high-yield investing at a time when investors can earn yields of around 7–8% from selected issuers.

Ms Ward said the improvement in credit quality partly reflected a change in how lower-quality corporate borrowers finance themselves. More highly leveraged borrowers that historically would have issued high-yield bonds have increasingly turned to leveraged loans and private credit markets.

At the same time, corporate risk appetite has become more conservative, with many companies using strong free cash flow to reduce debt rather than increase leverage.

While high-yield credit spreads remain below long-term averages, Ms Ward said the strength of corporate fundamentals and the absolute yields available to investors continued to make the asset class attractive.

Recent corporate earnings, revenues and cash flows remained solid, while the refinancing market remained open to companies across the credit-quality spectrum, keeping the pool of potential defaults relatively low.

Capital Group Fixed Income Investment Director Haran Karunakaran said the upshot for investors is that high yield has become a much more resilient asset class.

“Most strikingly, high-yield’s beta to equities has fallen from historical levels of 0.3-0.4 (non-crisis periods) to currently under 0.1 (see chart below). And this is while delivering almost 10% p.a. over the last 3 years.”

“The combination of these structural changes in high-yield markets, solid corporate fundamentals and high all-in yields, countering historically tight credit spreads, leaves us moderately constructive on the sector. It’s certainly not the time to go “all in” on high-yield risk, but equally staying out of the market could be costly in terms of foregone returns,” he said.

Ms Ward continued: “The macro backdrop looks very solid and risk-taking attitudes just haven’t been there.

“You have companies that are using their free cash flow to pay down debt.”

The high-yield market has also become shorter duration as companies have increasingly issued five-year rather than eight or 10-year debt, reducing investors’ exposure to movements in government bond yields.

Ward said tight spreads meant investors should retain capacity to increase exposure when periods of market volatility created better entry points, rather than necessarily maintaining maximum allocations.

For financial advisers, Ms Ward said one of the most important implications was to reconsider the traditional perception of high yield as simply the “junk bond” end of fixed income.

The combination of improved credit quality, shorter duration, strong corporate fundamentals and yields of around 7–8% meant high yield could play a role between traditional defensive fixed income and more return-seeking assets.

“The high-yield market should not be thought of as junk bonds. It’s a really well-functioning, diverse way that good-quality companies finance themselves. Many have no aspiration to be investment grade. This means that for investors, it’s a liquid, transparent way to earn returns of around 7% – 8% right now.

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The challenge is to understand and to recognise that geopolitics has moved from the margins to the core of markets.

Key takeaways

• The global system is becoming more fragmented and policy-driven, leading to more uneven and less predictable market outcomes.
• Geopolitical risk is now persistent, showing up not just in shocks but through ongoing volatility, bottlenecks and disruptions to how goods, capital and energy move.
• For investors, the priority is resilience: diversifying more deliberately, understanding where risks concentrate, and positioning for a wider range of outcomes shaped by policy.

The global operating system is being re-wired. Strategic rivalry is back, self interest is back, and the institutions built to manage a more cooperative world are visibly straining. None of this is sudden — the pressures have been building since the Global Financial Crisis (GFC) — but their impact on markets is becoming harder to ignore. This paper outlines the forces behind this transition, how they are playing out across major powers and regions, and what they mean for portfolio construction in a more fragmented global system.

Part I – The structural transition

Across modern history, world orders have followed a familiar pattern: initial stability, gradual weakening, crisis, and eventual renewal. The 20th century offers a clear illustration, as periods of stability gave way to crisis and renewal.

The post-Cold War system has followed a similar pattern — not through a single break, but through a structural shift compounded by a series of shocks.

China’s accession to the World Trade Organisation (WTO) in 2001 marked an important inflection point in a broader process of global integration. As trade barriers fell and economies became more connected, production networks expanded rapidly across borders. The scale and speed of that shift brought clear benefits, but also changes that were not always fully anticipated¹.

Over the following two decades, factories moved, supply chains stretched across borders, and production increasingly migrated to lower-cost countries. Many communities benefited from globalisation, but others saw jobs disappear and wages come under pressure. Governments began asking whether they had become too dependent on foreign suppliers for critical goods and technologies². This broader evolution sits at the heart of the current re-wiring.

Compounding this structural shift are events that challenged assumptions about stability and security which have further weakened the post-Cold War framework. The rise of non-state threats such as ISIS and Al-Qaeda drew sustained Western military engagement that produced mixed outcomes, eroding the perception of the United States as a reliable security guarantor. Russia’s military action in Ukraine in 2014 and again in 2022 demonstrated that borders that many assumed were settled could still be challenged by force. And more recently, contested episodes across the Western Hemisphere, the Arctic and the Middle East have shown how economic tools — tariffs, sanctions, investment screening — are increasingly used to pursue strategic objectives in lieu of, or alongside, traditional diplomacy³. Politics has grown more polarised, and the trust that underpinned the liberal order has deteriorated. Institutions such as the United Nations (UN) and WTO have struggled to bring countries together when crises emerge.

Taken together, these pressures have contributed to a gradual erosion of the post‑Cold War order.

Part II – Where we are now: A more contested and decentralised global landscape

The most recent transition is showing up in three important ways. First, the institutions designed to manage cross-border challenges are weakening. Second, the balance of global power is changing. And third, competition is increasingly moving into the economic domain, where states can exert pressure through trade, finance, technology and the systems that connect them.

Shift 1: Institutions are weakening and coordination is harder

The institutions that once anchored the global system are under strain. Governments are becoming more focused on jobs, security and resilience at home — often at the expense of cross-border cooperation. As a result, multilateral organisations such as the UN and WTO are finding it harder to coordinate responses or enforce rules. This is not just a shift in alliances, but in how the system functions. Instead of waiting for global agreement, countries are increasingly working through smaller coalitions and regional partnerships. The result is a system driven less by agreed rules and more by influence, bargaining power and changing partnerships.

Shift 2: Conflict is moving into the economic domain

Countries are competing in different ways. Rather than escalating into direct conflict, major powers are increasingly using tariffs, sanctions, export controls and restrictions on investments to shape outcomes.

At the same time, this competition is increasingly expressed through control over the networks that move goods, money and technology. Ownership of supply still matters. But increasingly, real leverage lies in controlling how that supply moves. Recent examples include gas flow to Europe, critical mineral restrictions and export controls. These show that economic pressure is now often applied by controlling key networks and relationships rather than disrupting supply altogether.

History reinforces the pattern. From wartime rationing to the control of shipping routes, states have long used bottlenecks as instruments of power.⁵ The result is that economic systems themselves have become arenas of competition.

Shift 3: Power is spreading

Global power is shifting — but not toward a new centre. Instead, it is spreading across multiple regional blocs. Major powers are consolidating influence, while smaller states are asserting more autonomy and aligning selectively. Relationships are becoming more flexible, and countries are working to reduce dependence on any single system, whether in trade, technology or finance. In practice, this shows up in efforts to diversify supply chains, payment systems and transport routes. The result is a world that is becoming more regional, with different centres of influence pursuing different priorities.

Part III – How major powers and regions are repositioning

Countries are responding to the same underlying shift, but not in the same way. So, the question isn’t simply who is doing what. The more useful question is: What are they trying to achieve? How are they going about it? Where are the pressure points? And where might those pressures create risks or opportunities for investors?

That’s the lens we apply in the table below. Rather than cataloguing every player, it focuses on four simple questions for each: what’s the objective, what’s the approach, what are the constraints, and why does it matter for markets.

There are a few common themes we can take away:

• Core system drivers: The US and China still sit at the centre of global markets, but policy changes, supply chains and technology competition are playing a bigger role in shaping outcomes.
• How shocks flow through markets: Russia and the Gulf states tend to affect markets mainly through energy prices, commodities and geopolitical tensions.
• Where diversification comes from: The EU, Japan and India offer different sources of return, driven more by local policy, reforms and regional growth.

Part IV – Investment implications

In today’s environment, investors face not just higher risk, but a broader set of potential scenarios. Three implications follow.

Takeaway 1: Geopolitical risk is no longer episodic

As international coordination becomes harder and competition plays out in economic channels (Shifts 1 and 2), geopolitical tensions are increasingly lasting longer and affecting markets through multiple channels. Markets have historically treated geopolitics as short-lived shocks. Today, the more important variable is duration. When tensions persist, costs accumulate through supply delays, tighter financing conditions, and higher required returns. While markets often price the initial shock quickly, historically, they have often been less effective at pricing the duration. For investors, this means reassessing exposures that rely on stable cross-border trade, financing, or policy assumptions, as well as concentrations that depend on a quick easing of tensions. Investors should not assume geopolitical shocks will be short-lived or quickly reverse themselves. Ongoing monitoring should focus on the duration of sanctions, tariffs, and export controls; whether trade and transport disruptions are becoming persistent; and signs that financing conditions or risk premia are adjusting beyond the initial shock.

Takeaway 2: Risk sits in bottlenecks, not just supply

Competition is increasingly expressed through control over the flow of goods, capital and technology, rather than outright supply disruption (Shift 2). Across sectors such as energy, semiconductors, critical minerals, and infrastructure, even limited disruption at key transit points can raise costs and create lasting disruption.

For investors, this means looking beyond supply and demand to understand dependence on key transport routes, infrastructure hubs, suppliers, access to funding and other critical networks.

Ongoing monitoring should focus on shipping patterns, insurance costs, and freight disruption as indicators of stress in trade networks, alongside export controls, investment restrictions, and other limits on the movement of goods, capital, or technology. Investors should also watch for evidence that chokepoints are creating persistent cost pressure rather than one-off disruptions.

Takeaway 3: Policy divergence is driving return dispersion

Policy divergence is no longer a background condition; it is increasingly shaping cost structures, market access, capital flows and strategic support across countries and sectors (Shift 3 and Part III). Reducing dependence is becoming a policy objective in its own right, even when it comes with higher costs. Over time, this is likely to contribute to greater variation in inflation, growth and corporate profitability across countries and sectors.

For investors, this means looking more closely at how businesses are exposed to government decisions. Companies that depend on highly globalised, lowest cost supply chains may face greater challenges, while those aligned with national priorities could benefit from public investment, incentives or regulatory support. Country and sector selection may therefore become more important.

Monitoring should focus on government initiatives aimed at strengthening domestic industries, securing critical supplies and encouraging local production, as well as signs that economic policies are becoming more differentiated across major economies.

Part V – Geopolitics has moved from the margins to the core

We are entering a period that no longer fits neatly within the frameworks investors have relied on for decades. It is a world less unified, less predictable, and at times less efficient. It is a world where cooperation cannot be assumed, and where policy choices carry greater weight.

But this is not a world without structure. Even as the old order evolves, new patterns are emerging, shaping how countries act, how markets adjust, and how risk moves through the system. For investors willing to look closely, those patterns offer something valuable: not certainty, but clarity of direction.

The challenge, then, is not simply to react. It is to understand and to recognise that geopolitics has moved from the margins to the core of markets. And in that environment, the advantage will not come from predicting every outcome, but from the discipline to study what is changing, to test assumptions against evidence, and to invest with a long-term perspective. Because for research based investors, insight is built over time, and it is that depth of understanding that enables portfolios not only to adapt, but to endure as the system continues to evolve.

By Andy Budden, investment director

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References:
[1] Autor, Dorn and Hanson (2016), “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade,” which examines how large trade shifts can have uneven and long-lasting effects across regions and workers.
[2] These developments reflect tensions highlighted by Dani Rodrik, who argued that deep economic integration would eventually clash with domestic priorities, leading to political backlash and more sovereignty-driven policy. Rodrik, D. (1997). Has globalization gone too far? Institute for International Economics.
[3] Aiyar, Ilyina and others (2023),“Geoeconomic Fragmentation and the Future of Multilateralism,” IMF Staff Discussion Note, which explores the growing use of economic policies to pursue strategic objectives and the risks this poses to global integration.
[4] Source: US Department of the Treasury press release, 28 February 2022.
[5] Olson, M. (1963). The economics of the wartime shortage: A history of British food supplies in the Napoleonic War and World Wars I and II. Duke University Press. His analysis shows how wartime pressures led states to manage supply through rationing, stockpiling and control of trade routes— illustrating how critical systems and bottlenecks can become instruments of power.
[6] The Strait of Hormuz is one of the world’s most critical energy chokepoints, with a significant share of global oil and LNG trade passing through it. Limited alternative routes mean that even temporary disruption can delay supply, increase shipping costs and affect global energy prices. See International Energy Agency (IEA), Strait of Hormuz; U.S. Energy Information Administration (EIA), World Oil Transit Chokepoints.
[7] Includes: Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, United Arab Emirates
[8] Sources: IMF (2023),“Currency Usage for Cross-Border Payments,” IMF Working Paper No. 2023/072; Carnegie Endowment (2023),“The Difficult Realities of the BRICS’ Dedollarization Efforts—and the Renminbi’s Role”; ECB (2025),“Global trade invoicing patterns.”

Risk factors you should consider before investing:
– This material is not intended to provide investment advice or be considered a personal recommendation.
– The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
– Past results are not a guarantee of future results.
– If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
– Some portfolios may invest in financial derivative instruments for investment purposes, hedging and/or efficient portfolio management.
– Depending on the strategy, risks may be associated with investing in fixed income, derivatives, emerging markets, sustainability-related investments and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.
Statements attributed to an individual represent the opinions of that individual as of the date published and may not necessarily reflect the view of Capital Group or its affiliates. This communication is intended for the internal and confidential use of the recipient and not for onward transmission to any other third party. This communication is of a general nature, and not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities. All information is as at the date indicated and attributed to Capital Group unless otherwise stated. While Capital Group uses reasonable efforts to obtain information from third-party sources that it believes to be accurate, this cannot be guaranteed. In Australia, this communication is issued by Capital Group Investment Management Limited (ACN 164 174 501 AFSL No. 443 118), a member of Capital Group, located at Suite 4201, Level 42 Gateway, 1 Macquarie Place, Sydney, NSW 2000 Australia. All Capital Group trademarks are owned by The Capital Group Companies, Inc. or an affiliated company. All other company names mentioned are the property of their respective companies. © 2026 Capital Group. All rights reserved.

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Guillermo Veiga

Capital Group, the world’s largest global active investment manager, announced the appointment of Guillermo Veiga as Chief Information Officer. He will join the company in November, succeeding Marta Zarraga, who will retire at the end of the year. Guillermo will relocate to California from Singapore, where he currently serves as Group Chief Information and Operations Officer at Standard Chartered Bank.

“Technology, data and AI play an increasingly important role in how we deliver investment excellence, serve clients globally and scale our business,” said Rob Klausner, Chief Operating Officer, Capital Group. “Guillermo brings a rare combination of deep technology expertise, operational leadership and global transformation experience. His track record leading large, complex organizations makes him the right leader to help advance Capital’s long-term strategy and position us for the opportunities ahead.”

Born in Uruguay and raised in Spain, Guillermo began his career as a hands-on technologist and has held senior leadership roles across Europe and Asia at Amazon Web Services, Cisco and Banco Santander, pairing deep technical fluency with strong operating experience.

“I was drawn by Capital Group’s long-term commitment to its people and culture paired with its client-centric mindset,” said Guillermo. “Capital is on the cutting edge of technology, and the opportunity to help lead during a period of global expansion for the company, amid the growing ability of data and AI to transform ways of working, is exciting.”

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