Fixed Income--Regarding relative return strategies

Rawlin tends to be quite active in individual bond management by moving in and out of specific issues to take advantage of temporary mispricing. Although the turnover in his portfolio is sometimes quite high, he believes that by using his gut instincts he can outperform a buy-and-hold strategy. Tejada on the other hand prefers using statistical software and simulation to help him find undervalued bond issues. Rawlin believes that Tejada’s approach needs futher evaluation over a period of both falling and rising interest rates, as well as in different credit environments.

What are their strategies:

A: Rawlin : Yield Pickup. Tejada: Total return approach

B: Rawlin: sector rotation. Tejeda: Sector rotation

C: Rawlin: total return approach. Tejada: Yield pickup

Source: Schweser 2012 vol II, Exam 3 afternoon. Question 35


I think it’s C also,

I think you may need the other part of the reading to properly answer the question. The focus was on how Rawlin and Tejada evaluated the trade. Rawlins considered the yield, while Tejada also considered possible macro events that would impact price, thus Tejada took a total return approach, while Rawlin focused on Yield pick up.

Answer is A

I picked B cuz they both sound the same…

why considering macro events a total return approach?

I was mistaken, in the example Tejada was considering credit related events that may impact price, but that alone doesn’t make it a total return approach. Considering all factors that impact price or income make it a total return approach. In the full reading for the question, Rawlin was only considering yield, while Tejada was considering other factors that would impact price and as a result he was most likely approaching it from a total return perspective.

^ thanks a bunch