KENNETH E. VOLPERT, CFA
Head of the Taxable Bond GroupThe Vanguard Group, Inc.
Traditional bond management can be likened to a sailing regatta. The index is the lead boat, since it doesn’t have to contend with expenses and transaction costs, and all managers (including index fund managers) are the other boats, trying to make up the distance and pass the index boat—or at least keep pace with it. Strategies that may be used to make up the difference and pass the index lead boat comprise a wide spectrum of styles and approaches. Exhibit 49–1 displays the major elements of these approaches.
EXHIBIT 49–1Traditional Bond Management Risk Sprectrum
In this chapter, we’ll examine this spectrum, ...