Summary of Fund Managers Approach to Value Creation

Summary of Fund Managers Approach to Value Creation 

The management of a portfolio of bonds may be undertaken either passively or actively. Passive fund management does not involve any actual analysis or portfolio selection, because the manager merely constructs the bond portfolio to mirror the benchmark or index whose performance he wishes to replicate. As such, passive fund management is more of an administrative function than an analytical or strategic one. 

Active fund management involves just that the manager makes the decision on which bonds to buy and the time at which to buy (and subsequently sell) them. The performance of an actively managed fixed-income portfolio is still measured against the relevant benchmark or index, because this serves to illustrate how well the manager is doing. If 

What approach is adopted by the active fond manager Portfolio managers employ four basic strategies to add value over and above the benchmark. We summarize these here  

Straight directional punt trade, and generally fund manj ers are given more latitude to put on relative value-style curve shaping trades compared to directional trades. However, this approach ultimately calls for the manager to call the directional move in the market r ht. 

---