The Theory and Practice of Investment Management: Asset Allocation, Valuation, Portfolio Construction, and Strategies, Second Edition

THE GLOBAL FIXED INCOME PORTFOLIO MANAGER

Because the portfolio manager competes for capital against other portfolio managers over relatively short time periods, investment choices may be far less committed than the loans of supras or other banks. In spite of the fact that the initial term of the commitment (maturity of the bond) is greater than the typical term of a bank loan, the homogeneity of the bond markets, the competition between portfolio managers, and the depth and organization of the bond markets, all contribute to market liquidity. Turnover occurs and prices of the bonds change as the opinions of the portfolio managers effectuate valuation changes.

Within the current global communication revolution, global credit risks are continually assessed from readily available new information. Yet, all of the hazards for the portfolio manager when considering investments in many of the world’s developing countries still exist. The portfolio manager must assess the probability within their interest rate forecast that private capital might be suddenly withdrawn from a particular country or company, or that the willingness of the country or company to honor its obligations may change. A sudden withdrawal of funds may have a significant destabilizing effect on the economies and prices of the securities and currencies of emerging capital markets or of other capital markets with comparatively high volatility rates. Conversely, the capital attracted to developing countries from ...