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Chapter 20 Bond Portfolio Management Strategies(投资分析与投资组合管理)
Matched-Funding Techniques
• Dedicated Portfolios
Dedication refers to bond portfolio management techniques that are used to service a prescribed set of liabilities
• Indexing
– The objective is to construct a portfolio of bonds that will equal the performance of a specified bond index
Active Management Strategies
• Interest-rate anticipation
Immunization Strategies
• Components of Interest Rate Risk
– Price Risk – Coupon Reinvestment Risk
Classical Immunization
• Immunization is neither a simple nor a passive strategy • An immunized portfolio requires frequent rebalancing because the modified duration of the portfolio always should be equal to the remaining time horizon (except in the case of the zero-coupon bond)
• Valuation analysis
– The portfolio manager attempts to select bonds based on their intrinsic value
• Credit analysis
– Involves detailed analysis of the bond issuer to determine expected changes in its default risk
Classical Immunization
• Duration characteristics
– Duration declines more slowly than term to maturity, assuming no change in market interest rates – Duration changes with a change in market interest rates – There is not always a parallel shift of the yield curve – Bonds with a specific duration may not be available at an acceptable price
Contingent Procedures
• A form of structured active management
– Pure Cash-Matched Dedicated Portfolios • Most conservative strategy – Dedication With Reinvestment • Cash flows do not have to exactly match the liability stream
Alternative Bond Portfolio Strategies
1. Passive portfolio strategies 2. Active management strategies 3. Matched-funding techniques 4. Contingent procedure (structured active management)
Core-Plus Bond Portfolio Management
• This involves having a significant (core) part of the portfolio managed passively in a widely recognized sector such as the U.S. Aggregate Sector or the U.S. Government/Corporate sector. • The rest of the portfolio would be managed actively in one or several additional “plus” sectors, where it is felt that there is a higher probability of achieving positive abnormal rates of return because of potential inefficiencies
Chapter 20 - Bond Portfolio Management Strategies
• What are the major contingent procedure strategies that are also referred to as structured active management strategies? • What are the implications of capital market theory for those involved in bond portfolio management?
Matched-Funding Techniques
• Horizon matching
– Combination of cash-matching dedication and immunization – Important decision is the length of the horizon period
Chapter 20 - Bond Portfolio Management Strategies
• What are the five alternative strategies available within the active management category? • What is meant by care-plus bond management and what are some plus strategies? • What is meant by matched-funding techniques, and what are the four specific strategies available in this category?
Active Management Strategies
• Yield spread analysis
– Assumes normal relationships exist between the yields for bonds in alternative sectors
• Bond swaps
A Global Fixed-Income Investment Strategy
Factors to consider
– The local economy in each country including the effects of domestic and international demand – The impact of 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
Questions to be answered: • What are the four major bond portfolio management strategies? • What are the two specific passive portfolio management strategies available?
Chapter 20 - Bond Portfolio Management Strategies
• What is the evidence on the efficient market hypothesis as it relates to bond markets? • What are the implications of efficient market studies for bond portfolio managers?
Matched-Funding Techniques
• Immunization Strategies
– A portfolio manager (after client consultation) may decide that the optimal strategy is to immunize the portfolio from interest rate changes – The immunization techniques attempt to derive a specified rate of return during a given investment horizon regardless of what happens to market interest rates
Bond Swaps
• Pure Yield Pickup Swap • Substitution Swap • Tax Swap