The risk/return trade-off

In order to efficiently manage risk in a fixed income market, one must first understand how to measure it. The introduction of an expanding range of more complex fixed income instruments, each with its own individual risk characteristics, is challenging the traditional asset allocation and risk management strategies employed by fund managers. Developing successful strategies to invest in more “specialist” asset classes such as emerging markets, convertibles and high yield, as well as more traditional fixed income securities, requires both an in-depth knowledge of these new instruments, and, crucially, the expertise to understand and control the risks therein.