An interesting book for financial buffs. It reviews the origin story of active bond trading and goes through some of the details Pimco used to “generate alpha”.
Some of the nifty tricks include:
- buying future contracts to meet risk requirements and then investing $ in short term bonds before the contract requires,
- betting on future volatility of the markets (upper and lower bounds),
- trading securities with itself (in differing accounts) to minimize fees,
- pricing bonds more aggressively than the market to front-load performance within a fund,
- and most generally, taking bets that future interest rates would be different from what “the market” was expecting.
Overall it was an interesting read, but some parts were a little slow, and of course, you have to have an interest in bonds.
3/5.