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Active management is key to fixed income alpha

This is an article published on Livewire recently.

Smart active managers in high-grade credit can find and exploit bond mispricings to generate alpha (or capital gains) that is as big, if not bigger, than the yield earned on these securities. This is Coolabah Capital Investment’s investment philosophy, which Portfolio Management Director Ying Yi Ann Cheng explains is backed by a large research team, charged with delivering prescient macro and quantitative insights.

“We’re the most active participant in the Aussie fixed income market. We’re typically trading 70 times a day, $100 million per day.”

Cheng says fixed income investors must be clear on whether they’re aiming to drive returns through yield, which means chasing risk, or capital gains, which requires skill. She adds that whereas traditional fixed-income strategies rely on loading up on interest rate duration risk, credit default risk, and/or liquidity risk when trying to secure higher yields, Coolabah focuses on applying up to 30 to 40 proprietary quant models to identify and exploit mispricings in liquid and high-grade credit with negligible default risk.

Read the full article here.

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