Introduction to fixed income portfolio management strategies, Financial Management

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  • Investors use two management strategies to manage their fixed income portfolios. They adopt either active management strategy or passive management strategy.

  • Active management can be defined as forecasts of returns for assets that are available.

  • A portfolio manager can minimize the values of the bond portfolio while implementing liability funding methods.

  • The bond market can be classified into various segments based on the nature of characteristics such as type of issuer, credit risk, coupon level etc.

  • Yield curve strategies are classified into bullet strategies, barbell strategies and ladder strategies.

  • Passive management strategy believes in Efficient Market Hypothesis.

  • Bond indexation serves the purpose of replicating the performance of a predetermined benchmark as closely as possible.

  • Cash flow matcshing strategy is used to build portfolio wherein the cash flows of the bond portfolio exactly match a stream of liabilities. 

  • Active bond management depends on an economic scenario in order to forecast the movements of yield curve.


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