25 years: Investment management
Unlike for equity portfolios, there is no standard model for fixed income portfolios. This is due to the fact that the drivers of total return for fixed income instruments are more complex than in the equity space. However, fixed income attribution models generally fall into three categories: Sector based, factor based and strategy based.
Unlike for equity portfolios, there is no standard model for fixed income portfolios. This is due to the fact that the drivers of total return for fixed income instruments are more complex than in the equity space. However, fixed income attribution models generally fall into three categories: Sector based, factor based and strategy based.
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7 mins 9 secs
Unlike for equity portfolios, there is no standard model for fixed income portfolios. This is due to the fact that the drivers of total return for fixed income instruments are more complex than in the equity space. However, fixed income attribution models generally fall into three categories: Sector based, factor based and strategy based.
Key learning objectives:
Understand why there is no standard fixed income attribution model
Outline the three main models for fixed income attribution
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When it comes to bond returns, the relationship may not be linear and will be affected by multiple factors. Some of the challenges in factor selection include the fact that:
Fixed income portfolios also contain more types of and more complex securities than equity portfolios, containing bonds, bond futures, IRS, CDS and currency forwards.
For these reasons, there is no standard attribution model for fixed income covering the whole variety of instruments and taking into account all the specific features of the instruments involved.
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