Fixed Income: A return to the glory days of yesteryear?
May 2nd, 2007 | Filed under: Portable Alpha & Alpha/Beta SeparationLike proprietors of some great tourist destination whose hayday has passed, Putnam Institutional Investments laments the lack of interest in fixed income investing in the age of portable alpha in their Winter 2007 institutional newsletter. But not content to sit back and watch tourists flock to some swanky new resort, Putnam warns:
“In the rush to embrace exciting new ideas about the power of separating alpha from beta, institutional investors shouldn’t forget the importance of a traditional investment concept that has stood the test of time: diversification. In building a well-balanced portfolio of alpha generators, fixed income represents a compelling choice.”
It’s not the most impassioned plea for the crowds to return, but it’s strangely compelling nonetheless. Rather than advocating a “back to basics” fixed income strategy, Putnam says that financial innovations such as credit default swaps have enables a whole new world of alpha-centric fixed income strategies such as (but not confined to) portable alpha. And as we’ve pointed out before on this website, “fixed income” and “portable alpha” don’t often appear in the same sentence.
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