Systematic Fixed Income

SCOTT A. RICHARDSON, PhD, is a Director at Acadian Asset Management, leading the systematic credit business. He is a professor at London Business School and has held senior positions at AQR Capital Management and BlackRock (Barclays Global Investors). He is an editor of the Review of Accounting Studies. Dr. Richardson earned his Ph.D. in Business Administration from the University of Michigan.

• Preface xiiiAcknowledgments xvAbout the Author xviiChapter 1 Setting the Stage 11.1 What is fixed income? 11.2 How big are fixed income markets? 31.3 What does it mean to be systematic? 81.4 Which fixed income markets will this book focus on? 151.5 Commonly used fixed income analytics 171.6 Other fixed income considerations 24References 28Chapter 2 Fixed Income – Strategic Asset Allocation 292.1 What are the key drivers of fixed income security returns? 292.2 What traditional risk premia can be harvested in fixed income? 362.3 The strategic diversification benefit of fixed income 502.4 Is the strategic diversification benefit of fixed income threatened in a low-interest-rate environment? 54References 55Chapter 3 Fixed Income – Tactical Asset Allocation 573.1 Market timing – term premium 573.2 Market timing – credit premium 703.3 Other considerations 83References 88Chapter 4 Incumbent Active Fixed Income Managers 894.1 Framework for active fixed income management 894.2 US Aggregate (Core Plus) benchmarked fixed income managers 944.3 Global Aggregate benchmarked fixed income managers 974.4 Unconstrained Bond Funds 1004.5 Emerging Market fixed income managers 1024.6 Credit long/short managers 104References 108Chapter 5 Security Selection – Rate-Sensitive Assets 1095.1 What is the investment opportunity set for developed market government bonds? 1095.2 Reducing the dimensionality 1125.3 A framework for security selection of government bonds (investment themes) 1195.4 A framework for security selection of government bonds (level, slope, and curvature) 1235.5 Extensions 131References 135Chapter 6 Security Selection – Credit-Sensitive Assets 1376.1 What is the investment opportunity set for developed market corporate bonds? 1376.2 Dimensions of active risk taking within corporate bonds 1456.3 A framework for security selection of corporate bonds (investment themes) 1496.4 A framework for security selection of corporate bonds (performance) 1586.5 Extensions 163References 170Chapter 7 Security Selection – Emerging Markets (Hard Currency) 1737.1 What is the investment opportunity for emerging market fixed income? 1737.2 A framework for security selection of hard currency emerging market bonds (investment themes) 1787.3 A framework for security selection of emerging market hard currency bonds (performance) 1827.4 Extensions 184References 186Chapter 8 Portfolio Construction Considerations 1878.1 Choices in the investment process (design and investment universe) 1878.2 Choices in the investment model (expected returns) 1918.3 Choices in the portfolio construction process (optimization, rebalancing, trading) 1998.4 Other topics 207References 208Chapter 9 Liquidity and Trading Considerations 2099.1 Some context for the liquidity challenges of fixed income assets 2099.2 Basics for trading credit-sensitive assets 2109.3 Electronification of trading for credit-sensitive assets 2199.4 Primary markets – liquidity provision 2219.5 Secondary markets – liquidity provision 2269.6 Ancillary topics 228References 232Chapter 10 Sustainability 23310.1 Interest in ESG/sustainability 23310.2 Sustainable investing with credit-sensitive assets 23510.3 Sustainable investing with rate-sensitive assets 249References 256Chapter 11 Putting It All Together 25911.1 What might a successful systematic fixed income investing process look like? 25911.2 Some final thoughts 272Reference 277Index 279