Active Fund Management - By Larger Risks

Active management of bonds is a strategy in which the active management risk factor does not match that of a bond indexing in terms of risk factors undertaken.

It is usually followed for a smaller duration, and hence the management fee and transaction costs are much higher compared to other approaches already discussed.

The advantage of following this approach is that it reduces the manager’s restrictions, and offers the facility to tune the duration of portfolio to the manager. It also offers room for increased expected return out the portfolio.

However, the drawback of using this strategy is that it increases the transaction costs as well as the management fee in most cases. Also, once the manager starts using more intelligence and discretion, his strategy is subject to higher degree of tracking error.

Unlock Premium Content

Upgrade your account to access the full article, downloads, and exercises.

You'll get access to:

Access complete tutorials and examples
Download source code and resources
Follow along with practical exercises
Get in-depth explanations

Active Fund Management - By Larger Risks

Unlock Premium Content

You'll get access to:

Enhanced Indexing Strategy - Small Risks

Full Blown Active Management

Topics

Related Groups