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CFA Level 3
Fixed Income Portfolio Management

Identifying the Correct Indexing Strategy

Easy Liability-driven Strategies Indexing

XYZ Pension Fund is considering an indexing strategy for part of its fixed-income portfolio to manage its liabilities. The fund aims to closely match its liabilities with a pool of bonds that reflects the characteristics of its expected cash outflows. The fund's investment committee is evaluating three different indexing strategies: Bond Indexing, Cash Flow Matching, and Duration Targeting. Which of the following strategies directly focuses on minimizing tracking error and closely aligning the bond portfolio's yield and risk characteristics with a specific bond index?

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Correct7.5K
% Correct67%