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Battle of the Bonds: Intermediate vs. Long

categories: Investing (Investment Management), RMA, Fixed Income, Research Paper, BAKER Edward, general

What is the appropriate passive benchmark or target for the fixed income portion of a pension fund? Long bonds don't seem to reward investors for the additional 'horizon' risk. Long bonds are an appropriate investment only when rates are expected to decline. The appropriate neutral position is to invest in intermediates; thus, the target portfolio or long-term benchmark should be intermediate, not long, bonds.