Beyond the Index: What’s in the Benchmark? A Deeper Look at Fixed Income Index Design

This webinar will look at the structural design of fixed income benchmarks in response to recent claims by active managers, who argue that passive indices are incomplete, inflexible, and potentially inefficient. We examine these claims through a series of empirical studies covering five key areas: benchmark market coverage, index weighting methods, rebalancing dynamics, fund performance, and systematic replication of active fixed income fund returns. We identify gaps in the representativeness of flagship indices, and propose an expanded “Total” index to reflect the full investable universe, demonstrate that market cap weighting and rebalancing does not introduce inefficiencies for broad benchmark indices.

Fund performance study shows that while active funds in some segments exhibit outperformance, this is largely attributable to systematic credit exposure rather than manager skill. Finally, we present methodologies for constructing indices that better reflect actual market participant's exposures and costs. Together, the research provides a data-driven foundation for improving benchmark design.