RT Journal Article
SR Electronic
T1 Rates Factors and Global Asset Allocation
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP jfi.2020.1.098
DO 10.3905/jfi.2020.1.098
A1 Joshua Kothe
A1 Harald Lohre
A1 Carsten Rother
YR 2020
UL https://pm-research.com/content/early/2020/06/22/jfi.2020.1.098.abstract
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.