Is Core Fixed Income a Commodity?

Press Release ( - CHICAGO - Sep 07, 2017 - In the investment industry there is a widely-held view that a core fixed income strategy is a commodity.  The theory being that variations exist among managers and styles but that over time there is an immaterial difference in returns.

Scott Skowronski, CFA, Principal and Senior Portfolio Manager at Chicago-based AAM Insurance Investment Management took a closer look at this issue and details his conclusions in a compelling new white paper that clearly illustrates that it is not a commodity.

Skowronski’s analysis concludes that mid-size managers – those with core assets ranging from $10 billion to $25 billion – demonstrated consistently superior performance while both the largest and smallest managers uniformly trailed that performance.

“My baseline hypothesis at the outset was simply that fixed income management is not a commodity.  That there are differences among managers.  And when I broke down the data by size of manager those differences revealed themselves,” said Skowronski.

According to Skowronski, what is obvious is that managers need scale in order to provide the expertise to be successful in the market but being too large can limit their capability.

“The largest players tend to mirror the benchmark because they have difficulty accumulating more than market weight positions so it’s hard for them to outperform the index,” Skowronski observed.  “For the smaller managers, there’s nothing specific that explains their underperformance other than they lack the resources or scale to gain full access to bond dealer offerings that the mid-size and larger players have.”

According to the paper, those investors that make the mistake of thinking that all things are equal when it comes to fixed income asset management run the risk of short-changing their returns by millions of dollars every year.

“In the paper we demonstrate that the difference in average annualized returns over 10 years is 1.58%.  That’s $15.8 million every year for a $1 billion core strategy,” Skowronski noted, “which is significant.”

The paper entitled, “Is Core Fixed Income a Commodity?” is available on the AAM Insurance Investment website at


Notes to Editors

About Scott Skowronski, CFA

Scott A. Skowronski, CFA is a Principal, Vice President and Senior Portfolio Manager at AAM Insurance Investment Management.  He has 20 years of experience with 18 years dedicated to fixed income.  Prior to joining AAM, Scott worked as a Portfolio Manager and Senior Credit Analyst at Brandes Investment Partners.  Prior to that he worked as a Fixed Income Portfolio Manager at Country Financial.  Scott is a member of the CFA Institute.  Scott earned a B.A. in Risk Management from Illinois Wesleyan University in Bloomington, Illinois.

About AAM

AAM is a Chicago-based insurance asset manager founded in 1982.  The company manages $19.2 billion of insurance company assets and specializes in customized investments that fit each client’s objectives and requirements for yield, total return, risk and tax exposure.  The firm offers specialty services such as accounting, tax modeling and enterprise risk management.  More information may be found at

Source : AAM Insurance Investment Management

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CATEGORIES : Insurance
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