For fixed income managers in Asia, replicating vast indices is a daunting task, often leading to manual trade-offs and complex stratified sampling. This report explores how portfolio optimization and factor risk models are enhancing traditional methods, enabling managers to handle thousands of constraints, reduce transaction costs, and achieve tighter benchmark alignment in today’s complex markets.
In this content, you will learn:
- The limitations of traditional stratified sampling and the overwhelming complexity fixed income managers face when trying to match numerous metrics manually.
- How a sophisticated optimization framework can handle thousands of inequality conditions and constraints, from country allocations to issuer-level limits.
- The critical trade-offs between competing objectives like country weights versus sector exposures, and how optimization provides a systematic approach to bond selection.
- How to use technology to address real-world scenarios, such as new fund launches and restricted holding lists, that introduce increasing complexity during normal operations.