Index

  • Active fixed income managers, 89–108
    • Core Plus US aggregate, 94–97
    • credit long/short, 104–108
    • emerging market, 102–104
    • Global Aggregate benchmarked, 97–100
    • for Global Unconstrained Bond funds, 100–102
    • roles of, 89–94
    • successful systematic strategies for, 259–272
  • Active risk taking, 145–149
  • Active Share, 27–28
  • Agency trading, 211
  • Alphas, 81
  • Andreani, M., 166
  • APG Asset Management, 253
  • Ashmore Group PLC, 173, 177
  • Asness, C., 60, 207
  • Assets:
  • Asset allocation:
  • Asvanunt, A., 31, 41, 44, 52, 54, 83
  • Attribution, 168–169
  • Axes, 226–227
  •  
  • Bad selling practices, 90
  • Bank for International Settlements, 3, 4, 174
  • Bank of America, 228
  • Banks, central, 40–41
  • Barclays Global Investors, 12
  • Beta:
    • completion, 207–208
    • constraints, 205
    • neutrality, 197
  • Bhojraj, S., 248
  • Bias, home, 25–27
  • BlackRock, 6
  • Bloomberg, 154, 220
  • Bloomberg Global Aggregate Index:
    • composition, 7, 8f
    • market capitalization, 6–7
    • performance of, 268–271
  • Bloomberg Global Securitized index, 46–47
  • Bonds:
  • Bridgewater Associates, 251, 252
  • Brooks, J., 128, 178, 185
  • Budget, turnover, 204–205
  •  
  • Campbell, J., 116
  • Cardinal scale, of risk, 196
  • Carry, 59–60
    • of credit excess returns, 71
    • of developed market corporate bonds, 157, 159f, 161f, 162f
    • of emerging market fixed income, 181
    • extension, 69, 82
    • of government bonds, 123
    • measuring, 62, 72–73, 76f, 79f
  • Cash flows (CF), 2
  • CDS (credit default swaps), 179–183, 221
  • CDX, 216–217
  • CEEMBI (JP Morgan Corporate Emerging Markets Index), 185
  • Central banks, role of, 40–41
  • Central limit order book (CLOB), 220
  • CF (cash flows), 2
  • CHTR, 215–216
  • Cliffwater Direct Lending Index, 49
  • CLOB (central limit order book), 220
  • Communication, importance of, 274–275
  • Complexity premium, 45–50
  • Constraints:
    • position size, 205–206
    • trade‐size, 205
  • Convexity, 20–21
  • Core Plus US aggregate benchmarked managers, 94–97
  • Corporate bonds, 185–186
  • Correia, M., 150–151, 153–154, 168
  • Correlation, 34–36
  • Cost analysis, transaction, 230–231
  • Country‐level sustainability, 249–251
  • Covariance, 33–34
  • COVID crisis, 144
  • Credibility, in primary markets, 225
  • Credit default swaps (CDS), 179–183, 221
  • Credit indices, trading conventions and liquidity, 216–219
  • Credit long/short managers:
    • active return analysis, 104–108
    • performance of, 264–266
  • Credit migration forecasting, 151
  • Credit premium, 43–45, 70–83
  • Credit‐sensitive assets, 139f
    • attribution with, 168–170
    • correlation between equity markets and, 37
    • data for, 165–166
    • developed market corporate bonds (see Developed market corporate bonds)
    • electronification of trading for, 219–221
    • IG vs HY markets, 166–167
    • liquidity of, 210–219
    • and machine learning, 167–168
    • maturity dimension of, 165
    • size and liquidity of, 163–165
    • sustainability with, 167, 235–249
  • Credit spreads, 71, 83, 238
  • Cremers, M., 27
  • Crowding, 207
  • Culture, 273–274
  • Currency, for fixed income, 25
  • Curvature assets, 118–119, 128–130, 130f
  •  
  • D2D (distance to default), 154–156, 155f
  • Data mining, 83–85
  • DDSs (domestic debt securities), 4
  • Debt financing, 3
  • Default forecasting, 151–153, 152f
  • Defensive:
    • developed market corporate bonds, 157–158, 159f, 161f, 162f
    • emerging market fixed income, 181–182
    • with emerging markets, 132–133
    • grouping, with other signals, 193
  • Dekker, L., 185–186
  • Developed market corporate bonds, 137–170, 141f–143f
    • active risk taking within, 145–149
    • extensions, 163–170
    • investment themes of, 149–158
    • opportunity set for, 137–145
    • performance of, 158–162
  • Developed market government bonds, 109–134
    • extensions, 131–134
    • investment opportunity set, 109–112
    • investment themes with, 119–123
    • level asset, 126–128
    • maturity bucket assets, 118–119
    • sample, 123–126
    • slope and curvature asset, 128–130
    • sustainability in, 251–253
    • zero coupon yield and PCA, 112–119
  • Diep, P., 47
  • Discretionary investors, 8–12, 9f
  • Distance to default (D2D), 154–156, 155f
  • Diversification, 81
    • benefits of, 11, 50–54
    • and factor timing, 194
    • and interest rates, 54–55
    • international, 27
    • in security selection, 159–160
  • Diversification benefit:
    • of fixed income investments, 50–54
    • in low interest environments, 54–55
  • Domestic debt securities (DDSs), 4
  • Domicile of issuer, 190
  • Duration, 20
  •  
  •  
  • Failure, 272–273
  • False positive rate (FPR), 151
  • Federal Funds Rate, 40
  • Financial assets, pricing, 1–2
  • Financing, debt, 3
  • Fixed income:
    • analytics for, 17–24
    • currency hedging in, 25
    • defined, 1–3
  • Fixed income markets:
    • market capitalization of, 4f, 5f
    • size of, 3–8
  • Ford Motor Co., 228
  • Forecasting:
  • FPR (false positive rate), 151
  • Frazzini, A., 132–133
  •  
  • G0BC index, 138
  • Gibbons, Michael, 114
  • Global Aggregate benchmarked managers:
    • active return analysis, 97–100
    • performance of, 268–270
  • Global equity markets, 3
  • Global Unconstrained Bond fund managers:
    • active return analysis, 100–102
    • performance of, 268–272
  • Government bonds, 3. See also Developed market government bonds
    • growth and inflation with, 52
    • return source of, 32
    • term premium, 38–43
    • yield, 40–42
  • Great Financial Crisis, 46
  • Greenwich Associates, 220
  • Grinold, R., 12, 202
  • Grover, S., 44–45
  •  
  • H0A0 (HP00) index, 138
  • Hard currency, see Emerging markets
  • Harries, J., 84
  • HCC, 215–216
  • Hedging, 25
  • Hendershot, C., 44–45
  • High yield (HY) corporate bonds, 137, 144
    • performance of, 263–264
    • and sustainability, 246
    • trading convention for, 214–216
  • High‐yield issuers, 16
  • High‐yield markets:
    • excess returns in, 81–82
    • investment grade vs., 166–167
  • Home bias, 25–27
  • Houweling, P., 185–186
  • HP00 (H0A0) index, 138
  •  
  • ICE/BAML Global Government Index (W0G1), 109–110, 110f, 111f, 133
  • IDSs (international debt securities), 4
  • IG (investment grade) corporate bonds, 137, 144, 260–261
  • Ilmanen, I., 3, 60, 130
  • Inflation, 41, 52
  • Information ratio, 195
  • In‐sample fitting, 151
  • Interest rates, 40, 54–55
  • International debt securities (IDSs), 4
  • International diversification, 27
  • Investment Company Act (1940), 188
  • Investment grade (IG) corporate bonds, 137
    • credit spreads for, 144
    • performance of, 260–261
  • Investment grade markets, high‐yield vs., 166–167
  • Investment signals, 191–199
    • about, 191–193
    • and active risk, 196
    • converting raw data to, 61–62, 72–73
    • defensive (see Defensive)
    • grouping, 193
    • investment choices based on, 196–199
    • missing, 196–197
    • mixing or integrating, 206–207
    • momentum (see Momentum)
    • selecting weights for, 193–195
    • tracking performance and outperformance of, 68
    • units for weighting, 195–196
    • value (see Value)
  • Investors, discretionary, 8–10
  • Israel, R., 130, 149, 156, 158, 205
  • Issue concession, 221–224
  • Issuers:
    • domicile of, 190
    • high‐yield, 16
    • private, 190
  • ITraxx, 216–217
  •  
  • JP Morgan Corporate Emerging Markets Index (CEEMBI), 185
  • JP Morgan Emerging Market Bond Index Global Diversified (EMBIGD), 174–177, 175f–177f
  • JP Morgan Government Bond Index (GBI), 145
  •  
  • Kahn, R., 202
  • Kang, J., 168
  • Kealhofer, S., 154
  • Kessler, S., 84
  • Key rate durations, 30–31
  • Kizer, J., 44–45
  • Kwan, S. H., 156
  •  
  • Lee, R., 130
  • Level assets, 118, 126–128
  • LGD (loss given default), 148
  • Liquidity, 209–231
    • active fixed income managers role with, 92
    • challenges of, 209–210
    • of credit‐sensitive assets, 163, 210–219
    • in investment process, 189
    • limited, in fixed income, 6
    • in primary markets, 221–225
    • in secondary markets, 226–228
    • and substitutions, 228–229
    • sustainable, 228
    • and transaction cost analysis, 230–231
  • LiquidNet, 220
  • Lo, A., 116
  • Lok, S., 148
  • Long duration corporate bonds, performance of, 261–263
  • Loss given default (LGD), 148
  •  
  • Machine learning, 167–168
  • MacKinlay, C., 116
  • Macroeconomic theory, 41
  • Maloney, T., 60
  • Managers:
  • MarketAxess, 220
  • Market‐capitalization weighting, 133–134
  • Market segmentation, 166–167
  • Market timing:
    • credit premium, 70–83
    • data for, 60–62, 72–73
    • extensions, 69–70, 82–83
    • framework for, 57–60, 70–72
    • scatter plots to assess, 62–67, 73–81
    • skill in, 67–68, 81–82
    • term premium, 57–70
  • Maturity:
    • of emerging market hard currency bonds, 184–185
    • remaining time to, 190
  • Maturity bucket assets, 118–119
  • Memory, and data mining, 85
  • Momentum:
    • and credit spreads, 71
    • of developed market corporate bonds, 156–157, 159f, 161f, 162f
    • of emerging market fixed income, 180–181
    • example, 197–199
    • extension, 69, 82
    • of government bonds, 122
    • grouping, with other signals, 193
    • measuring, 60–62, 72–73, 75f, 78f
  • Moskowitz, T., 128, 130
  • Muskens, F., 185–186
  •  
  • Neutrality, of investment signals, 197
  • New York Fed, 211
  •  
  • Opportunity set, for emerging market hard currency bonds, 173–178
  • Optimal weight analysis, 54
  • Ordinal scale, of risk, 196
  • Out‐of‐benchmark tilts, 91–92
  •  
  • Palhares, D., 104, 149, 156, 158, 163–164, 166, 205, 275
  • PCA (principal component analysis), 112–113
  • Pedersen, L., 132–133
  • Performance:
    • of Bloomberg Global Aggregate Index, 268–271
    • of credit long/short managers, 264–266
    • of developed market corporate bonds, 158–162
    • of emerging market hard currency bonds, 182–184, 266–268
    • of Global Aggregate benchmarked managers, 268–270
    • of Global Unconstrained Bond fund managers, 268–272
    • of high‐yield corporate bonds, 263–264
    • of investment grade corporate bonds, 260–261
    • as investment signal, 68, 194
    • sustainability improving, 236–237
  • Petajisto, A., 27
  • Portfolio construction process, 187–208
    • beta completion, 207–208
    • constraints, 205–206
    • and crowding, 207
    • and expected returns, 191–199
    • investment choices in, 187–191
    • objective function, 200–202
    • rebalancing, 204–205
    • risk modeling, 203–204
    • signals integrated in, 206–207
    • sustainability in, 243–247
    • units in, 202–203
  • Portfolio managers, 10–11
  • Position size constraints, 205–206
  • Prepayment premium, 45–50
  • Prepayment risk, 47–48
  • Pricing, security, 2
  • Primary markets:
    • liquidity in, 221–225
    • mechanics of, 224–225
  • Principal component analysis (PCA), 112–113
  • Private issuers, 190
  • Private markets, risk premiums of, 49
  • Project Neptune, 228
  •  
  • Rate‐sensitive assets:
  • Rebalancing, 204–205
  • Regression coefficient, 44
  • Remaining time to maturity, 190
  • Returns:
    • active fixed income managers, 93–100
    • calculating, 30
    • drivers of, 29–36
    • rate portion of, 30–32
    • spread portion of, 30–32
  • Reuters, 154
  • Richardson, S., 31, 41, 44, 47, 52, 54, 83, 104, 128, 148–151, 153–154, 156, 158, 163–164, 166, 168, 178, 185, 205, 275
  • Risk:
    • and active risk taking, 145–149
    • with hard currency bonds, 178
    • modeling, 203–204
    • prepayment, 47–48
    • and signal weighting, 195–196
  • Riskless bonds, 31
  • Risk premia, 36–50
    • credit premium, 43–45, 70–83
    • emerging markets, 49
    • equity market, 50
    • prepayment/complexity/volatility premium, 45–50
    • private markets, 49
    • term premium, 38–43, 57–70
  • Robeco, 249, 251
  •  
  • Scale, in primary markets, 225
  • Scatter plots, 62–67, 73–81
  • Scherer, B., 84
  • SDG (sustainable development goals), 253, 254f
  • Secondary markets, liquidity in, 226–228
  • Securitized market, 45–48
  • Security pricing, 2
  • Security selection:
  • Segmentation, market, 166–167
  • Shared monetary policy framework, 131–132
  • Sharpe ratios, 11, 38, 48
  • Signals, investment, see Investment signals
  • Slope assets, 118–119, 128–130, 129f
  • Sortino ratios, 54
  • Spread, 43
  • Strategic asset allocation, 29–55
    • diversification benefit of fixed income, 50–54
    • drivers of returns, 29–36
    • home bias in, 25–27
    • in low interest environments, 54–55
    • and risk premia, 36–50
  • Substitutions, 228–229
  • Sustainability, 167, 206, 228, 233–256
    • country‐level, 249–251
    • with credit‐sensitive assets, 235–249
    • interest in, 233–234
    • with rate‐sensitive assets, 249–256
  • Sustainable development goals (SDG), 253, 254f
  • Swaminathan, B., 248
  • Systematic fixed income investing:
    • with credit long/short portfolio, 264–266
    • with emerging market bond portfolio, 266–268
    • failure in, 272–273
    • with Global Aggregate benchmarked portfolio, 268–270
    • with HY corporate bond portfolio, 263–264
    • with IG corporate bond portfolio, 260–261
    • with long duration IG corporate bond portfolio, 261–263
    • size of universe for, 13–15
    • successful strategies for, 259–272
    • with Unconstrained Bond portfolio, 268–272
  • Systematic investors:
    • approach of, 12–13
    • belief in market efficiency for, 276–277
    • communication for, 274–275
    • defined, 8
    • discretionary vs., 8–12, 9f
    • expectations about roles/responsibilities of, 273–274
  • Systematic managers, 11
  •  
  • Tactical asset allocation:
    • adding breadth for, 85–87
    • and data mining, 83–85
    • market timing (see Market timing)
    • remaining fully invested for, 87–88
  • Taylor‐Rule, 41
  • TC (transfer coefficient), 204
  • Technical default, 150–151
  • Term premium:
    • market timing, 57–70
    • and yields, 38–43
  • Term spread, 60
  • Thapar, A., 130
  • Tilts, out‐of‐benchmark, 91–92
  • Timing, market, see Market timing
  • TPR (true positive rate), 151
  • TRACE (trade reporting and compliance engine), 166, 189
  • Trade lists, in system investing, 10
  • Trade reporting and compliance engine (TRACE), 166, 189
  • Trade‐size constraints, 205
  • TradeWeb, 220
  • Transaction cost analysis, 230–231
  • Transfer coefficient (TC), 204
  • Treasury bill, 60–61
  • True positive rate (TPR), 151
  • TruMid, 220
  • Tuna, İ., 150–151, 153–154
  • Turnover budget, 204–205
  •  
  • UCITS funds, 188
  • United Nations Principles or Responsible Investing (PRI), 234
  • University of Pennsylvania Wharton School, 114
  • US bonds, 51–52
  • US Federal Reserve, 40
  • US stocks, 51–52
  •  
  • Value:
    • and data mining, 84
    • of developed market corporate bonds, 150–156, 159f, 161f, 162f
    • of emerging market fixed income, 179–180
    • extension, 69–70
    • of government bonds, 120–121
    • grouping, with other signals, 193
    • measuring, 60, 61, 72–73, 74f, 77f
  • Van Zundert, J., 185
  • Variance, 33–34
  • Volatility premium, 45–50
  •  
  •  
  •  
  • Yield, 18–20
    • and carry, 60
    • and interest rates, 55
    • zero‐coupon, 113–118, 114f–117f
  •  
  • Zero‐coupon yield, 113–118, 114f–117f
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