Fixed Income and Treasury

The Top 10 Fixed Income White Papers for Pension Funds

Savvy Investor is a unique professional network for pension funds, asset owners and investment managers, curating the world’s best investment research from around the web.

Savvy Investor

The Best White Papers for Pension Funds investing in Fixed Income

Here are some of the most popular white papers for fixed income investors, so far in 2015: 

1. What if we live in a low-return world? Implications for US pension funds (JP Morgan, 2015)

The first section of this paper examines long-term economic and demographic trends and discusses the outlook for long-term interest rates and capital market returns. The second section explores the portfolio implications of the market backdrop, together with possible investment strategies.

2. The Five C's of Bond Market Liquidity (BlackRock, 2015)

This 8 page paper from BlackRock examines the price impact for changing bond market assets into cash. The report discusses the five factors which determined the "price" of liquidity, and sets out a spectrum of fixed income asset classes, from most liquid to least liquid. It also examines the upward sloping curve which describes how yield varies with liquidity risk.

3. Fixed income diversification within DC plans (JP Morgan, 2015)

On the Savvy Investor site we have a few papers which explore fixed income investment options within DC plans. The authors argue that most DC plans have insufficient choice with regard to fixed income investment options.

4. Why are UK index-linked gilts persistently over-valued? (PIMCO, 2015)

Index-linked gilt yields are being driven to unreasonably low levels. Given the current negative real yields, if the thirty-year index-linked gilt held to its maturity, investors would be guaranteed a massive 23% loss in real purchasing power in terms of the Retail Price Index (RPI). Does this have any fundamental justification?

5. De-risking Goes Further than Interest Rate Risk: The Argument for Dynamic Asset Allocation in an LDI Solution (GMO, 2015)

We have a number of papers on the management of fixed income portfolios within an LDI strategy. This one from GMO considers how valuation considerations can be built into an LDI strategy.

6. Expected Returns in Treasury Bonds (Cieslak and Povala, 2015)

This academic paper examines expected returns in Treasury bonds, decomposing Treasury redemption yields into expected inflation and maturity-specific interest rate cycles (defined as the component in yields orthogonal to expected inflation). 

7. Fixed Income Overlay Strategies (PH&N, 2014)

The authors describe various overlay strategies that use derivative instruments and leverage with the objective of managing overall portfolio risk. Particularly relevant to pension plan investors, but also to institutional investors with term structure objectives, seeking alpha, or rebalancing exposures.

8. A Factor Approach to Smart Beta Development in Fixed Income (BlackRock, 2015)

The idea of passive funds that depart from index weights, based on factor exposures, has become very popular in equity investment management. This paper explores how these ideas can be extrapolated into the world of fixed income.

9. Managing Cash Investment Portfolios (PwC, 2015)

This PwC report examines trends in corporate cash management and highlights potential improvements in practice. The paper is informed by a survey of senior treasury and financial professionals and aims to help treasury managers do their job better.

10. Bond Investors Must Harness Big Data's Brave New World (BlackRock, 2015)

The cardinal sin of any statistical modeler is “over-fitting” the data, and to avoid this quants will tend towards simpler models with fewer variables. This means throwing away the ability to identify subtle, less easily explained, non-linear relationships. Machine learning provides a way around this, using algorithms and modelling techniques already widely adopted in other industries.

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