Portfolio Construction — September 19, 2022

Portfolio construction in practice: Tracking a high-yield index

In this research paper, we showcase how a portfolio manager can replicate fixed income indices using the Axioma Portfolio Optimizer and the Axioma Credit Spread Factor Risk Model. We replicate a US high yield index with liquid bonds and a set of derivatives and test the solution from a risk perspective. The end goal is to create a set of portfolios that is more cost efficient, as (or more) liquid and as diversified as the index.

Author

Joseph Au-Yeung

Director, Head of Front Office Solutions, APAC

Hassan Ennadifi

Executive Director, Product Specialist

Jean-Baptiste Solanet

Principal, Solutions Specialist