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KIC000073 - I” Bond Investment Strategies Used by...

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Unformatted text preview: I” Bond Investment Strategies Used by Investors I Matching strategy 1': The bond portfolio generates periodic income that can match expected periodic expenses [:1 Involves estimatin future cash outflows and developing a ban portfolio that can generate sufficient payments to cover those outflows I Laddered strategy , :1 Funds are evenly allocated to bonds in each of several different maturity classes El Achieves diversified maturities and different sensitivities to interest rate risk Bond Investment Strategies Used by Investors (oont'd) I Barbell strategy El Funds are allocated to bonds with a short term to maturity and bonds with a long term to maturity I Niocates some funds to achieving relatively high returns and otherfmds to cover quuidityneeds I Interest rate strategy D Funds are allocated to capitalize on interest rate forecasts Ci Requires frequent adjustment in the bond portfolio to reflect current forecasts Return and Risk of International Bonds I The value of an international bond Is influenced by: DChanges in the risk-free rate of the currency denominating the bond nChanges in the perceived credit risk of the bond nExchange rate risk ...
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