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Finance & Investment Conference Bond Asset Management – An Overview Paul Sweeting

abcd. Finance & Investment Conference Bond Asset Management – An Overview Paul Sweeting. 22-24 June 2003 The Caledonian Hilton Hotel, Edinburgh. Types of bonds and their components Credit ratings Bond pricing Benchmarks and indices Liability-based benchmarks Index-tracking

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Finance & Investment Conference Bond Asset Management – An Overview Paul Sweeting

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  1. abcd Finance & Investment ConferenceBond Asset Management – An OverviewPaul Sweeting 22-24 June 2003 The Caledonian Hilton Hotel, Edinburgh

  2. Types of bonds and their components Credit ratings Bond pricing Benchmarks and indices Liability-based benchmarks Index-tracking Active management Risk controls Implementation Reporting Topics

  3. Government and credit Fixed interest and index-linked Sterling and non-sterling Actual and synthetic synthetic versions of hard-to-get bonds corporate + inflation bonds = synthetic index-linked corporate ilg + credit default swap = synthetic index-linked corporate gilt + cds = synthetic corporate Types of bonds and their components

  4. Investment grade High yield Credit ratings

  5. Gilts given by yield Investment grade corporates given by spread Sub-investment grade bonds given by price quoted as p per £ if close to default Bond pricing

  6. Single currency government bond indices Global government bond indices Single currency aggregate/corporate bond indices Barclays Capital iBoxx Merrill Lynch JP Morgan Liability based Benchmarks and indices

  7. Transparent From an experienced provider Replicable Representative Investible Flexible Reflective of investor needs Consistent Benchmarks – desirable qualities

  8. No under-performance Low fees Diversification Time-efficient Rule-based decision making but Anomalous index construction Corporate bond market inefficiencies Replication challenges Index-tracking – why

  9. Full replication Stratified sampling Index-tracking – how

  10. Sources of added value market allocation yield curve positioning/duration sector allocation stock selection off-benchmark Relative importance Diversification Performance & dispersion Active management

  11. Client restrictions duration country credit Modelling credit risk ratings migration contingent claims market based Risk controls

  12. Dealing in the market New issues Implementation

  13. Frequency Content Commentary Data Other Reporting

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