Research Paper : Are Unconstrained Bond Funds a Substitute for Core Bond?

Proponents of unconstrained bond funds suggest that their flexibility in decision making and broader universe (1) helps insulate investors from growing interest rate risk; (2) allows allocation decisions to be made based on the relative attractiveness of assets rather than benchmark mandates; and (3) creates the potential for additional uncorrelated sources of alpha. In practice, it appears that (1) core bond funds continue to play an important role in portfolios that rising interest rates would not negate, including acting as a diversifier of equity risk, stabilizing a portfolio’s value in falling equity markets; and (2) that while in principle unconstrained bond funds are capable of playing the role that core bonds serve, in practice it appears the universe of managers employing unconstrained strategies have substituted credit risk for interest rate risk.

Read full paper here

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About AIWMI

The Association of International Wealth Management of India (AIWMI) is a not-for-profit organization and a globally recognized membership association for finance professionals. AIWMI primarily focuses on the broad and strategic role of developing a more robust and forward-looking training infrastructure for the financial services sector and to promote more active industry involvement and collaboration in training and continuing education. AIWMI is offering advanced international certification programs along with a wide variety of high-quality executive education programs. AIWMI programs combine state-of-the-art knowledge and skills with practical experience and insights into the functioning of the financial sector. All AIWMI courses and educational events have an intense and pragmatic curriculum. Participants are exposed to the latest developments within the financial services sector. AIWMI plays a key role in guiding the development of the financial services sector. AIWMI works with key industry participants’ viz. the Government, the Regulators, the Industries/Associations, the Corporate, the Media and the General Public to achieve its objectives. Besides enhancing technical competence and professionalism in the industry, AIWMI organizes events and facilitates discussions to promote best practices in leadership and talent development in the financial sector with an aim to become Asia’s premier center of excellence for financial education.

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