Mastering the Bloomberg Global Aggregate Bond Index | Insight Investment

“Fixed income benchmarks are skewed towards issuers with the most debt outstanding. This creates a myriad of structural inefficiencies across bond markets that active managers can seek to exploit.”

Spanning more than 30,000 securities across government bonds, corporate credit and securitised markets, the Bloomberg Global Aggregate Bond Index offers a broad snapshot of global fixed income. Its scale and diversity make it the natural benchmark for many investors seeking exposure to global bond markets.

Yet beneath the surface, structural inefficiencies can shape outcomes in ways that passive investors may not fully appreciate. Fixed income indices are weighted by debt outstanding, meaning exposure often tilts towards the most indebted issuers. This can create hidden risks, particularly as credit quality evolves over time.

At the same time, today’s environment is changing. Yields have returned to levels not seen since before the global financial crisis, offering a potentially attractive starting point for future returns. Meanwhile, recurring episodes of market volatility are creating pricing dislocations that skilled active managers can seek to exploit.

In this paper, we explore how active investors can try to master the Global Agg, highlighting nine distinct strategies that can be used with the goal of generating benchmark beating returns. This includes yield curve positioning and security selection to exploiting market fragmentation and cross-country opportunities.