ABSTRACT
Given the equity market's move to indexing, it was natural to ask whether similar logic might be applied to other asset classes. Because bonds may represent a large share of the sponsor's portfolio, they came under particular scrutiny. As fund sponsors developed sophisticated evaluations of fixed income investments, bond investment goals went from emphasizing yield to total return, to total return, to active return over a benchmark, and finally to risk-adjusted active return. This caused the parameters of benchmark returns and risks to be carefully calibrated, allowing active management performance to be easily compared to the benchmark.
