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Fixed Income - The Best White Papers from Sept-Oct 2017

Bond market investing - the best recent research papers

We are in an environment where credit spreads are close to all-time lows, and a decade of QE is coming to an end. What does this mean for fixed income investors?

In the papers below, a variety of approaches are taken in assessing the outlook for fixed income markets.  NNIP sets out two potential economic scenarios, and assesses their impact upon different classes of fixed income investment. Goldman Sachs examines the best relative value strategies. Robeco warns of the dangers of being addicted to short-term investment performance.

In the current environment, it can be argued that risk management takes on even more importance than usual. In our first research paper, Axioma examines the benefits and challenges of risk factor decomposition and portfolio optimization.

Savvy Investor

Fixed Income Portfolio Optimization (Axioma, 2017)
Christopher Martin, Kartik Sivaramakrishnan and Robert Stamicar explore optimization techniques to help portfolio managers with constructions and hedging of fixed-income investment strategies.

Fixed Income Investing and Interest Rates: From shake-up to new normal (NNIP)
(For compliance reasons, this paper is only accessible in certain geographies)
Should global growth and interest rates move higher, fixed income investors will need to reassess their course and look for short duration and specialized solutions. This NNIP paper explains further.

Emerging-market debt: Navigating the allocation dilemma (Eaton Vance, Sept 2017)
(For compliance reasons, this paper is only accessible in the USA and Canada)
Positive fundamental changes in emerging markets over the past 10-15 years, combined with steady economic expansion and the increased popularity and supply of EM debt indices, have begun to transform EM Debt into a recognized, mainstream asset class.

Reflation: Assessing the Impact to Portfolios (PineBridge, Sept 2017)
During the stall-speed regime certain strategies which worked well are not likely to provide substantial risk-adjusted returns moving forward. While academics have demonstrated that asset classes tend to maintain generally consistent Sharpe ratios over long periods, these averages may not hold true under different market regimes, which can, at times, span over several cycles.

Credit Quarterly Outlook Q4 2017 (Robeco)
In this quarterly paper, Robeco’s Credit team explores the challenges and opportunities facing credit markets.

Quantitative Easing: The Long Unwinding Road (GSAM, Oct 2017)
Central banks are set to unwind the extraordinary accommodation put in place since the global financial crisis. This outlook paper takes a deep dive into the potential asset implications of the global QE retreat.

Global Fixed Income Views 4Q 2017 (JP Morgan)
This paper by JP Morgan Asset Management explores the fixed income outlook for 4Q 2017. The authors discuss key economic themes and their implications on investors' strategies.

Fixed Income Strategy: The limits of "no limits" (BlackRock, Sept 2017)
This BlackRock outlook paper shines a spotlight on the European Central Bank (ECB), its expected policy shift on asset purchases and the potential market implications.

Value in Fixed Income? It's all Relative (GSAM, Sept 2017)
Value can be challenging to find, in fixed income, in the current market environment. The authors of this paper believe that relative value strategies offer compelling opportunities to find value in fixed income. 

Global High Yield Outlook Q4 2017: Valuations in context (Fidelity International)
(For compliance reasons, this paper is only accessible in the UK and Europe)
In this paper, strategists at Fidelity International put global high yield valuations in context and highlight two areas where opportunities for alpha generation may still be found in Q4 2017.

The Beauty of Bank Loans (PineBridge, 2017)
US and European bank loans offer a number of important advantages to investors and could almost have been designed with the current market conditions in mind. 

Incorporating Liquidity in Constructing a Corporate Bond Index (S&P Dow Jones)
This paper examines liquidity criteria that may potentially be used in the construction of liquid fixed income indices. The authors use the S&P 500® Investment Grade Corporate Bond Index, to develop a framework for narrowing an investable basket.

Hedging HY and EM Bond Tail Risk With VIX® Futures (S&P Dow Jones Indices, 2017)
High yield corporate bonds and emerging market U.S. dollar-denominated bonds are both credit-focused fixed income sectors. Lack of liquidity at times for both sectors can make hedging bond portfolios a challenge.

Bonds Are Different: Active Versus Passive Management in 12 Points (PIMCO, 2017)
In this paper, the authors revisit the active-passive investment discussion by contrasting equity and fixed income markets in the United States. PIMCO finds that active bond mutual funds have typically outperformed their passive peers.

2017 AFP Liquidity Survey: Report of Survey Results (SSGA)
This 29-page report by State Street Global Advisors (SSGA) and AFP provides the findings of a recent survey on liquidity. It explores the challenges of navigating geopolitical, interest rate, and regulatory landscape shifts.

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