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Our views 28 February 2020

Passive credit can mean missing out

5 min read

RLAM believes that active management of credit bond portfolios adds long-term value significantly in excess of costs compared with lower-cost passive approaches that add no value; the adoption of a passive approach will mean that clients miss out on individual sources of value and that their funds will consequently deliver lower returns.

Asymmetry of credit bonds – why this favours the active manager Fundamentally, the risk and return characteristics of bonds are very different from equities and this in turn enables an active bond manager to improve the risk and return characteristics of a portfolio compared to its benchmark. Bond returns are asymmetric – upside is generally getting your stream of coupons and the repayment of principal at maturity.

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