(Harvest) Passive global bond investors may be getting more than they bargained for—in terms of risk, that is. That’s because lower-yielding debt is over-represented in the benchmark, providing less buffer—and other types of risks may be locked in.
Japan, for example, is by far the largest share of the global bond universe, but it offers negative yields. In contrast, some of the most attractive opportunities today—for example, Australian sovereigns or —are either small components of the index or aren’t in the benchmark at all. That means passive portfolios don’t take advantage of them.
