The numbers don't look good for active bond managers that flaunt their trading chops. As liquidity wanes, portfolio turnover – a widely used measure of trading activity in investment funds – for many categories of bond funds is down 70% to 50% from peak levels.
Stripped of their ability to trade in and out of securities with ease, active bond managers are using more derivatives to express their ideas and reserving cash to deploy opportunistically during liquidity-driven sell-offs.
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