Modern Bond Investment Strategies: A Way to Identify Better Fixed-Income Investments
Dr. Yun Bai, Head of Factor Investing Research Multi Asset, Vontobel Asset Management
The year 2022 will be described in the history books as the worst for global fixed-income investments for decades. Supply chain disruptions, war in Europe, soaring energy prices, and galloping inflation have left significant negative footprints on the global economy. To combat high inflation, central banks intervened by raising interest rates. A key question now is whether the situation is pivoting or whether uncertainties remain.
After the sell-off in the bond market, bond prices dropped significantly. If central banks manage to stabilize inflation in the near future, the bond market offers pricing and yields that are both attractive.
Identifying, from the massive universe of corporate and government bonds, those fixed-income investments that offer the best risk-adjusted return is difficult. The traditional focus on duration and rating alone no longer seems appropriate in the current complex environment. Accordingly, factor-based models—in the same vein as those used for equities—are currently being explored. Their practical application in bond investment strategies to increase performance and lower risk correlations is, however, challenging.
Objective
This Master Class provides an in-depth understanding of the factor models currently being applied to bond investments. It offers, from an academic perspective, a thematic overview, and discusses the factors most relevant for modern fixed-income investment strategies. The following topics are addressed, including in hands-on group problem-solving exercises:The industry challenges that have led to alternative investment approaches
- Theoretical foundations of fixed-income factor models
- Established factor investing strategies for bonds
- How factor investing can be integrated into portfolio management
Target Audience
The Master Class is aimed at professionals in the financial industry who work in institutional banking, asset and wealth management, or investment banking.
SAQ Recertification
This Master Class is an acknowledged SAQ recertification measure for the CWMA profile and comprises four learning hours.