Mutual funds and ETFs must buy index bonds and match the position weights of their benchmark index. Even in a market environment where fixed income yields are approaching zero or even negative, fund managers are buying these securities to match the Index.
Fixed Income Index Replication
01. Сhallenge
The Principals at ASA have been identifying and exploiting relative value opportunities in the fixed income markets since 1988. We use this same relative value philosophy to generate alpha AND to reduce risk for our Index replication clients.
- Why buy securities that yield zero or less?
- Why buy credits that have more risk?
02. Solutions
We believe that clients are much better served owning securities and overweighting sectors that have higher yields and superior credit profiles rather than blindly matching index weights.
