With much of the juice squeezed out of the U.S. bond market, ING Investment Management is positioning itself for better returns abroad.

“Global diversification is an attractive opportunity,” said Christine Hurtsellers, chief investment officer of fixed income and proprietary investments for ING. “There’s ample opportunity over the coming years within both developed foreign bond markets and emerging markets.”

Simple maths underpins ING’s investment thesis. Yield on the benchmark 10-year U.S. Treasury note has fallen to about 2% as of this month from 5% five years ago. The compression generated total return of 48% for the years 2007-2011 inclusive, a remarkable run for what is perceived as a risk-free asset.

But with bond yields at record lows, few market participants see much in the way of additional upside. For their part, ING managers expect a generally stable ‘coupon-clipping’ market for at least the near term; not bad, but not good enough to stand pat on positions.

“In this low interest rate environment in the U.S., people are continuing to look for opportunities to diversify away from U.S. interest rate risk,” said Matt Toms, head of U.S. public fixed income at ING. “Add in the longer-term belief that the dollar is poised to weaken given current fiscal and monetary policy, and that opens up opportunities for foreign currencies and foreign bonds to potentially outperform over a long-term horizon.”

ING Investment Management, based in New York, is the primary asset management unit of Dutch financial service giant ING Group. ING Investment Management manages about $166 billion, of which $120 billion is in fixed income and managed out of Atlanta.

Of the fixed income assets, about $38 billion is in investment-grade corporate bonds; $15 billion is in residential mortgages, predominantly agencies with some non-agency and subprime; and $2 billion is in high-yield bonds. The rest is spread across cash, Treasuries, hard and local currency sovereign debt, structured credit, private placement and commercial loans. Most of ING’s clients are institutional, though there is a $12 billion mutual fund business.