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Buy-and-hold Strategy (Passive Management)
Selects a portfolio of bonds based on the objectives and constraints of the client with the intent of holding these bonds to maturity.
Indexing Strategy (Passive Management)
Portfolio of bonds that will be matched as closely as possible to the performance of a specified bond index.
Divide their investment funds evenly across the portfolio into instruments that mature at regular intervals.
Active Management Dimensions
Scalability (i.e., how large a position can
Sustainability (i.e., how far into the future the strategy can be successfully employed
Extreme values (i.e., how exposed the strategy is to the chance of a large loss).
Interest Rate Anticipation (Active Management)
Riskiest active management strategy because it involves relying on uncertain forecasts of future interest rates.
Valuation Analysis (Active Management)
Select bonds based on their intrinsic value, which is determined based on their characteristics and the average value of these characteristics in the marketplace.
Credit Analysis (Active Management)
Detailed analysis of the bond issuer to determine expected changes in its default risk.
Yield Spread Analysis (Active Management)
Yield volatility and the behaviour of embedded options
Yield volatility and transactional liquidity
The effect of yield volatility on the business cycle
Active Global Bond Investing (Factors)
The local economy in each country that includes the effect of domestic and international demand.
The impact of this total demand and domestic monetary policy on
inflation and interest rates.
The effect of the economy, inflation, and interest rates on
the exchange rates among countries.
Passive Management Strategies
Buy and Hold
Active Management Strategies
Interest rate anticipation
Yield spread analysis
Core-plus Management Strategies
Active/passive "plus" sectors
Dedicated (exact cash match)
Dedicated (optimal cash match)
Contingent and Structured Strategies
Bond portfolio management techniques that are used to service a prescribed set of liabilities.
The process intended to eliminate interest rate risk
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