Who Fuelled the Oil Bonds Bubble?

It has become popular to blame passive investors and index funds for the recent rise (and fall) in prices for U.S. high yield bonds.  The thesis – placing passive investors as the culprit – goes as follows: There have been material, positive flows into passive bond funds, at the expense of active funds. Passive bond funds typically track indices that are market-cap weighted, that is, with a higher weight in issuers that have a greater value of outstanding debt. Such trends have rewarded the most-indebted companies with an “irrational” demand for their bonds. –

See more at: http://www.indexologyblog.com/2016/04/11/who-fuelled-the-oil-bonds-bubble/

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