Active core bond managers often beat the benchmark. But active approaches can differ meaningfully and may lead to varying results or elevated, and unwanted, volatility. This analysis includes a review of those managers that have relied on duration timing to help achieve potential outperformance and the study also includes:

1. An assessment of the level of volatility behind approaches that focus on duration timing outside of a specific band relative to the benchmark.
2. A discussion on ways that credit exposure, over time, provides dimensionality for skilled credit managers and historically higher spreads than losses from default.
   
3. Why more repeatable and reliable sources of alpha through credit may moderate historically higher volatility from rates.

 

Authors:

Joseph Graham, CFA, Senior Managing Director & Head of Investment Strategist Group, Lord Abbett
Gursahib Narula, Quantitative Analyst, Lord Abbett

 

This material has been prepared exclusively for use by analysts, institutional investors and their consultants, registered investment advisors, broker-dealers, and sponsors of plans with a minimum of 100 participants. It is not intended for, and should not be used with, small plan sponsors, plan participants, or the public in written or oral form or for any other purpose.