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Equity vs Bond Indices

A Case for Active Management in Fixed Income? 

Nicolas Rabener
10 min read
18 Nov 2019

SUMMARY

  • Bond indices are frequently portrayed as featuring a lower quality composition than equity indices
  • Analysing equity and bond indices in the US and emerging markets confirms this view
  • Perhaps this explains why there is some alpha generation in fixed income   

INTRODUCTION

While almost all fund managers in equities across market segments underperform their benchmarks over time, the data for fixed income fund managers is more diverse and highlights pockets of alpha generation. For example, in the decade from 2008 to 2018, 80% of the fund managers focused on long-term US investment grade bonds underperformed their benchmark, but only 43% of the managers trading short-term bonds, according to the S&P SPIVA Scorecard for 2018.

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