Chapter 44. Fixed Income Portfolio Investing: The Art of Decision Making

CHRIS P. DIALYNAS

Managing Director–Portfolio Management, Pacific Investment Management Company

ELLEN J. RACHLIN

Managing Director–Portfolio & Risk Manager, Mariner Investment Group, Inc.

Abstract: Global fixed income portfolio managers must make complex investment choices amongst the universe of global fixed income products. In a sense, all global issuers of debt that rely on the public markets for capital can compete for the global portfolio manager's investment funds. The issuers that offer securities with the highest risk-adjusted returns will be most attractive to the global bond portfolio manager who selects among these global investment opportunities in such a way that is designed to outperform a benchmark index. Inherent in the investment decision are choices on duration, country, sector, currency, and product. These choices are built upon forecasts. The global portfolio manager allocates capital in accordance with their confidence in their forecast and in context of the current market valuations, market liquidity, and asset volatility. The global fixed income portfolio is a result of their constraint optimization process given these factors.

Keywords: capital markets, global fixed income portfolio manager, bond portfolio manager, market environments, global economies, interest rate forecast, economic forecast, high performing bond portfolio, global policies, federal budget, Federal Reserve, duration, portfolio ...

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