Financial Education

In a pure indexing strategy, the goal is to produce a portfolio that perfectly matches the benchmark. All bonds would be owned in the same proportion as their weight in the index.

Full replication is more commonly practiced in equity portfolios, as equities tend to be far more liquid than bonds. Bonds’ illiquidity makes the strategy difficult to implement. The difficulty, inefficiency and high costs of implementation result in this strategy being attempted only rarely.

For more information, see all articles on: Fixed income investments, Investing in bonds, Passive Management, Portfolio Management

See also:

Enhanced Indexing Strategies for Fixed Income Portfolios

Enhanced Indexing Risk Factors in Fixed Income Portfolios

Criteria For Selecting a Fixed Income Index

Choosing a Fixed Income Manager

Performance Attribution for Fixed Income Managers