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Active Bond Portfolio Management


An investment policy whereby managers take certain direct action prior to final maturity of underlying bonds in order to gain from potential changes in future interest rates. This involves buying and/ or selling bonds prior to their maturity dates, and spotting any relative mispricing opportunities in the fixed-income market.

The active bond portfolio management, as a strategy, focuses on total returns from component debt securities rather than risk elimination. By nature, active management entertains a higher risk tolerance than passive management. Active managers are willing to take the risk associated with betting on the future direction of interest rates.

A bond portfolio can be managed in a number of ways, primarily including active management, passive management, or a hybrid management that involves both styles. Passive strategies are like the buy-and-hold indexing which entails minimal trading and mainly focuses on attempts to match a bond index. Active strategies include interest rate prediction and valuation analysis, engaging more in active trading to try to outperform the market based on the predictions made.



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Portfolio management constitutes the art and techniques of managing a group of assets which are owned or controlled by an investor (individual or institutional) in ...
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