What role is the fund expected to play in the portfolio?

The role needs to be stated in portfolio language. Possible roles include Flexible income allocation, Active duration allocation, Credit allocation tool, Defensive bond allocation, All-weather fixed-income allocation, or Opportunistic fixed-income strategy.

What decision are we delegating to the manager: duration, credit, liquidity, relative value, or a combination?

A strategic bond fund may be able to change duration, credit quality, sector exposure, currency positioning, geography, liquidity profile and derivative exposure. That means the allocator is not simply selecting a bond fund. They are delegating a chain of decisions across the fixed-income toolkit.

What are the dominant risk levers today?

Risk levers include Duration, Credit quality, Spread duration, Liquidity, Currency, Geography, Sector exposure, and Derivatives.

How liquid is the portfolio under stressed conditions?

Would the portfolio behave differently under redemption pressure or wider bid-offer spreads?

Strategic Bond Funds: Portfolio Role, Flexibility and Governance Risk

Sheridan Admans
May 28
11 min read

Updated: May 30

Strategic and flexible bond funds are rarely bought because allocators lack fixed-income options. They are usually considered because the allocator wants to delegate part of the rate, credit, liquidity and relative-value decision to a manager with a broader toolkit.

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Strategic Bond Funds: Portfolio Role, Flexibility and Governance Risk

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