Documente Academic
Documente Profesional
Documente Cultură
Bond Portfolio
Management
Strategies
Presented By:
Michelle Q. Andres
Marypearl Navarro
Rogene Manangan
Kimberly Calaje
Almira Abalos
Presented To:
Mr. Garry Romano
Matched-funding Techniques
5 Types of Strategies
1. Passive Management Strategies
A style of management associated with mutual
and exchange-traded funds (ETF) where a fund's portfolio
mirrors a market index. Passive management is the
opposite of active management in which a fund's
manager(s) attempt to beat the market with various
investing strategies and buying/selling decisions of a
portfolio's securities.
a. Buy and Hold
- A manager selects a portfolio of bonds based on the
objectives and constraints of the client with the
intent of holding these bonds to maturity
positions
b. Indexing
- The objective is to construct a portfolio of bonds that
-
a. Interest
-
Rate Anticipation
Risky strategy relying on uncertain forecasts
Ladder strategy staggers maturities
Barbell strategy splits funds between short duration
and
Tax swap
-
munis)
Swap strategies and market-efficiency
- Bond swaps by their nature
suggest
market
inefficiency
f. Active Global Bond Investing
- An active approach
to
global
fixed-income
enhanced indexing)
A large, significant part of the portfolio is passively
4. Matched-Funding Strategies
a. Dedicated Portfolios
- Designing portfolios that will service liabilities
- Exact cash match
Conservative strategy, matching portfolio cash flows
payments
- Dedication with reinvestment
Does not require exact cash flow match with liability
stream
Great choices, flexibility can aid in generating higher
returns with lower costs
b. Immunization Strategies
- The process is intended to eliminate interest rate risk
that includes:
Price Risk
Coupon Reinvestment Risk
- A portfolio manager (after client consultation) may
decide that the optimal strategy is to immunize the
-
c. Classical Immunization
- Immunize a portfolio from interest rate risk by
keeping the portfolio duration equal to the
-
investment horizon
Duration strategy superior to a strategy based only a
maturity since duration considers both sources of
interest rates
Yield curves shift
e. Horizon matching
- Combination of cash-matching dedication and
-
immunization
Important decision is the length of the horizon period
With multiple cash needs over specified time periods,
can duration-match for the time periods, while cashmatching within each time period
horizon value
Cushion spread is potential return below the current
market return
Safety margin is a portfolio value above the required
value
Trigger point refers to the minimum return that will
stop active portfolio management