I wrote this book to help fill a void between theoretical fixed income asset pricing and the practicalities of investing in fixed income securities. Fixed income is a ubiquitous component of asset owner portfolios. Fixed income markets are enormous (well in excess of $100 trillion USD) and have traditionally been seen as a powerful diversifier alongside equity market allocations. To date, incumbent investment approaches for active risk taking in fixed income are typically discretionary. These discretionary approaches tend to be dominated by reaching for yield (spread) behavior that dampens the strategic diversification benefit of a fixed income allocation. With the advent of improved data sources (from pre‐ and post‐trade price transparency to enhanced fundamental data insights for issuers of debt) systematic investment approaches can now be feasibly applied to fixed income markets. The potential for asset owners is enormous: a way to preserve the diversifying potential of fixed income as an asset class and add excess returns via security selection.

This book lays out a framework for identifying the relevant sources of risk and return in public fixed income markets. After a comprehensive analysis of the strategic and tactical roles that fixed income can play in asset allocation, the book covers the systematic return sources for rate and credit sensitive fixed income assets across developed and emerging markets. Armed with an understanding of return drivers, the book then explores the implementation challenges (e.g., liquidity, risk) that need to, and can, be overcome to successfully build a systematic fixed income portfolio. Putting it all together, the reader will appreciate the powerful diversifying potential of a well‐implemented systematic fixed income allocation.

Although the book is primarily targeted to institutional asset owners and investors with an interest/responsibility for the fixed income asset class, the content is also suitable for advanced‐degree students and other investment professionals looking to expand their knowledge of fixed income investment approaches.