Managing fixed income portfolios

Krishnamurti, Chandrasekhar (2009) Managing fixed income portfolios. In: Investment management: a modern guide to security analysis and stock selection. Springer-Verlag, Berlin / Heidelberg, Germany, pp. 439-451. ISBN 978-3-540-88801-7


[Chapter Introduction and Objectives]:
As pointed out in the chapter on fixed income securities, the market for debt instruments is large and growing. Active players in the market include mutual funds,
pension funds, banks, and financial institutions. In this chapter we provide an overview of strategies for managing fixed income portfolios. The subject is inherently
complex and quantitative. Consequently, we have left out the details to specialized books on fixed income portfolio management. Readers may refer to the references provided at the end of the chapter.

At the most basic level, managing a fixed income portfolio consists of making a forecast of the yield curve and deciding which instruments will best take advantage of
those forecasts. The key relationship is between interest rates and prices; a change in the yield curve wiIl have an unequal impact on the prices of different bonds. In addition, though, yield curve changes have an impact on credit spreads (as credit spreads and yield curve changes are both affected by the business cycle) and the relationship between interest rates and credit spreads needs to be considered. Unlike equities,
for instance, fixed income instruments are typicaIly traded over the counter. This implies that liquidity and pricing are concerns for traders. The universe of instruments available to the fixed income manager has greatly expanded, with a variety of synthetic structures now available. As a result, portfolio managers now have sharper tools for managing portfolio risks and for maximizing returns given risk.

In this chapter, we consider the following aspects of fixed income portfolio management:

I. Passive management
2. Active management: money market funds (MMFs)
3. Active management: treasury funds
4. Active management: credit risk approaches
5. Active management: multicurrency approaches
6. Performance measurement

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Item Type: Book Chapter (Commonwealth Reporting Category B)
Refereed: No
Item Status: Live Archive
Additional Information: Chapter 18. Author's version not available.
Faculty/School / Institute/Centre: Historic - Faculty of Business - School of Accounting, Economics and Finance (1 Apr 2007 - 31 Dec 2010)
Faculty/School / Institute/Centre: Historic - Faculty of Business - School of Accounting, Economics and Finance (1 Apr 2007 - 31 Dec 2010)
Date Deposited: 17 Jun 2010 00:44
Last Modified: 12 Sep 2016 02:22
Uncontrolled Keywords: fixed income; portfolios
Fields of Research (2008): 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150201 Finance
Fields of Research (2020): 35 COMMERCE, MANAGEMENT, TOURISM AND SERVICES > 3502 Banking, finance and investment > 350202 Finance
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