Prepare for Portfolio Changes

Andrew Pace

Market Minute

October 24, 2018

Andrew lays out a few reasons that a bond portfolio’s embedded risks and expected returns may change—such as the passage of time, changing spreads, or moving rates. He focuses on extension risk and price depreciation risk and walks through a few examples of sectors whose stated durations or cash flows have become longer rather than shorter. Finally, he emphasizes the importance of reviewing Look-Forward® analyses on a regular basis, so portfolio managers can stay on top of changes that may impact their total returns.