Tapping a Misunderstood Alpha Source: Effective Corporate Bond Portfolio Construction

Learn how portfolio construction can unlock excess returns.

Many corporate credit investment managers do not place enough weight on the importance of portfolio construction. Moreover, many investors in the corporate credit market do not fully understand why portfolio construction is so important or what implications effective or ineffective portfolio construction can bring to their overall returns. 
The latest white paper from Aviva Investors explains why investors should look more closely at the portfolio construction process when considering and evaluating corporate credit managers. The discussion includes:

  • Why behavioral biases among credit managers can lead to portfolios that are overweighted toward more risky corporate issues.
  • Why tracking error is important, and why managers should beware of its limitations as a way to measure risk.
  • How effective portfolio construction can uncover sources of alpha that helps achieve outperformance in up and down bond markets.
  • We believe effective portfolio construction is an inexpensive alpha source that can help credit managers build portfolios around their best ideas while also producing consistent and uncorrelated excess returns in both bull and bear credit markets.
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