PT  - JOURNAL ARTICLE
AU  - Joshua Kothe
AU  - Harald Lohre
AU  - Carsten Rother
TI  - Rates Factors and Global Asset Allocation
AID  - 10.3905/jfi.2020.1.098
DP  - 2020 Jun 23
TA  - The Journal of Fixed Income
PG  - jfi.2020.1.098
4099  - https://pm-research.com/content/early/2020/06/22/jfi.2020.1.098.short
4100  - https://pm-research.com/content/early/2020/06/22/jfi.2020.1.098.full
AB  - Style factors that are prominent in other asset classes, such as carry, value, momentum, and defensive, do extend to the fixed income domain as well. We investigate factor investing across global government bonds and the use of such rates factors for a multi-asset investor. These rates factors significantly improve the investment opportunity set of investors, representing valuable tail hedges and offering diversification potential. Furthermore, complementing conservative multi-asset strategies by rates factors can enhance returns and reduce the likelihood and severity of downturns not only in-sample, but also in out-of-sample portfolio simulations.TOPICS: Factor-based models, style investing, fixed income and structured financeKey Findings• Style factors that are prominent in other asset classes, such as carry, value, momentum, and defensive, do extend to the fixed income domain as well. • These rates factors significantly improve the investment opportunity set of multi-asset investors, representing valuable tail hedges and offering diversification potential.• Complementing conservative multi-asset strategies by rates factors can enhance returns and reduce the likelihood and severity of downturns not only in-sample, but also in out-of-sample portfolio simulations.