Investment Management
Managing This ETF Is Like Solving a $55 Billion Rubik’s Cube
Jasmita Mohan and Karen Uyehara run AGG, the largest bond exchange-traded fund, by sampling the almost 10,000 securities in its benchmark.
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If you think running a passive bond fund is a formulaic task that a robot could do, think again.
When your underlying index is filled with thousands of fixed-income securities, tracking it isn’t exactly a simple task. The crux of the problem: It’s essentially impossible to own every note and bond in the benchmark. If you therefore use a selection of its constituents to replicate the benchmark, you have to continually tweak the characteristics of your optimized portfolio to home in on the performance of the underlying index.