Interview Guides
You are reviewing a $500 million multi-asset portfolio after a 200 bps rise in benchmark interest rates over one quarter. Your CIO wants to know whether the quarter’s negative performance came mainly from price marks, lower carry, or credit spread widening. You have the portfolio’s starting market value, yield, duration, and the size of the rate shock by sleeve. Assume no trades during the quarter and ignore fees.
| Sleeve | Starting Market Value | Yield at Start | Modified Duration | Rate Shock | Credit Spread Widening |
|---|---|---|---|---|---|
| Government bonds | $200,000,000 | 3.0% | 6.5 | +2.0% | 0.0% |
| Investment-grade credit | $180,000,000 | 4.2% | 5.2 | +2.0% | +0.5% |
| Floating-rate loans | $120,000,000 | 6.0% | 0.4 | +2.0% | +1.0% |
Quarter length: 3 months.
What are the key drivers of portfolio performance in this rising-rate quarter, and which sleeve contributed most to the decline? Quantify the impact using a duration-and-carry framework and explain how you would separate rate effects from spread effects.
