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Quantifying Alpha of Active Managers: A Case Study on Factor-Based Performance Attribution in Fixed-Income

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  • Traut, J.
  • Simonov, A.
  • Meitner, M.

Abstract

This paper contributes to the ongoing debate of whether active investing is still worthwhile in presence of factor investing. It provides a universal framework that selects presumably factor-heavy fixed-income funds. To test the framework, returns of an exemplary fund are neutralized for factor exposures. Roughly 60% of returns are attributed to factors and the remaining 40% are interpreted as the manager's alpha. While these results are only valid for this particular fund, the analysis provides a better understanding of the active/passive discussion in fixed-income and contributes worthy insights to the fund manager selection and performance evaluation literature and practice.

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  • Traut, J. & Simonov, A. & Meitner, M., 2022. "Quantifying Alpha of Active Managers: A Case Study on Factor-Based Performance Attribution in Fixed-Income," Research Journal for Applied Management (RJAM), International School of Management (ISM), Dortmund, vol. 3(1), pages 85-115.
    • Handle: RePEc:zbw:ismrja:324725
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