Institutional investors are worried about deteriorating credit conditions and geopolitical tensions, according to a new survey of conducted by Fitch Ratings and the Fixed Income Forum.

The survey found that 87% of investors believe that limited or no corporate cash will go toward debt reduction. Rather, most survey participants believe corporate cash will continue to fund shareholder-oriented transactions, including share-buybacks, dividend increases, and leveraged buyouts.

The majority of investors surveyed expect both the high yield default rate and corporate leverage to move moderately higher over the next year, and, 31% and 19%, respectively, believe significant credit deterioration will take hold in emerging markets and high yield.

The survey was conducted prior to recent tensions in the Middle East, yet 42% of investors placed the geopolitical climate as a high risk to the U.S. credit markets, and oil price volatility was viewed as the leading macroeconomic concern.

“Among other interesting findings, the survey shows the shift in corporate strategy from cost control and balance sheet management to shareholder returns weighs on the minds of fixed income investors, who have also seen spreads and terms increasingly favor borrowers,” said Mariarosa Verde, managing director, credit market Research, Fitch Ratings.

Roughly a third of investors placed rising interest rates, inflation and oil price volatility as high risks to the U.S. credit outlook, and most were dissatisfied with bond covenant packages, especially investment-grade covenants, it found.

Also, 65% of respondents said that their firms would modestly increase usage of credit derivatives, and an additional 16% expect the increase to be substantial.

The survey was conducted in mid-June and includes responses from senior investors at traditional asset management firms, insurance companies, pension funds, hedge funds and banks. Firm-wide fixed income assets under management of survey participants ranged from less than $20 billion to portfolios in excess of $100 billion. The survey will be conducted semi-annually.