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What does a Fixed Income Manager do?

By Justin Riche
Updated Mar 03, 2024
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The job of a fixed income manager is to oversee a fixed income portfolio and design appropriate investment strategies in order to secure a regular stream of income and capital gains. Whether these goals are achieved will normally depend on the competence of the manager in question. This will usually also determine the fate of his or her stay and advancement in this field of finance. The portfolios that are managed will consist of fixed income securities such as bonds, preferred stocks, mortgage-backed securities (MBS), asset-backed securities (ABS) and more.

Fixed income securities are issued by many types of institutions and organizations around the world, such as governments and corporations. These securities offer different levels of risk and return, and because there are many types of fixed income securities, they tend to have some very different characteristics. One characteristic they share in common, however, is that they pay a fixed rate of interest to those who buy them for their portfolios. A fixed income manager is responsible for analyzing the different characteristics, weighing the potential risks and returns and making a decision to acquire the ones that will best serve the purpose of his or her operations.

Depending on the size of the firm or operation, a fixed income manager can perform varied tasks. Such tasks might include research and analysis, trading and rebalancing portfolios. Research mainly involves looking for new opportunities regarding fixed income investments. Analysis entails the assessment of any potential risks that might arise from making certain investments. The manager also will study ways to manage and minimize risk while boosting returns. Trading is mainly about buying and selling the securities on the market.

Rebalancing is the act of returning the components of a portfolio to their original intended weights. For example, a fixed income manager might plans to keep his or her portfolio at 70 percent government bonds and 30 percent corporate bonds. If the corporate bonds, for example, were to outperform the government bonds, that might make up 37 percent of the portfolio. He or she will sell the appropriate amount of corporate bonds and funnel the proceeds into more government bonds. This way, he or she will bring the balance back to 70 percent government bonds and 30 percent corporate bonds.

Managing a fixed income portfolio usually requires an aptitude for mathematics, because analyzing the securities that comprise a portfolio demands many calculations to measure risk and return. Depending on the investment strategies of the particular firm or the manager himself or herself, statistics can come in handy to measure performance and to help make forecasts. The knowledge and practice of asset management theories is essential as well for this position, among other relevant skills.

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