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Barclays Capital Aggregate Bond Index

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Title: Barclays Capital Aggregate Bond Index  
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Subject: Post-modern portfolio theory, Bond market indices, Merrill Lynch Domestic Master, Salomon BIG, Lehman Brothers
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Barclays Capital Aggregate Bond Index

The Barclays Capital Aggregate Bond Index, which used to be called the "Lehman Aggregate Bond Index," is a broad base index, maintained by Barclays Capital, which took over the index business of the now defunct Lehman Brothers, and is often used to represent investment grade bonds being traded in United States. Index funds and exchange-traded funds are available that track this bond index.

Contents

  • History 1
  • Index characteristics 2
  • Investing 3
  • See also 4
  • References 5
  • External links 6

History

The Lehman Aggregate Bond Index was co-created in 1973 by Art Lipson and John Roundtree, both of Kuhn Loeb & Co., a boutique investment bank. It was later renamed the Barclays Capital Aggregate Bond Index.[1]

Index characteristics

The Barclays Capital Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. Municipal bonds, and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues. The index includes Treasury securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amount of foreign bonds traded in U.S.

The Barclays Capital Aggregate Bond Index is a long term index. The average maturity as of December 31, 2009 was 4.57 years.

Investing

Many index funds and exchange-traded funds attempt to replicate (before fees and expenses) the performance of the Barclays Capital Aggregate Bond Index. Some examples of such funds include iShares Barclays Capital Aggregate Bond Index (AGG), Thrift Savings Plan (F Fund) Fixed Income Index fund, Vanguard Total Bond Market Index Fund (VBMFX), and Fidelity U.S. Bond Index Fund (FBIDX). Fund managers sometimes subdivide the different parts of the Aggregate by maturity or sector for managing individual portfolios. The Municipal section of the index is the only part of the index that cannot be used for this purpose - because municipal debt is issued by so many different entities, the Municipals in the Aggregate are only intended to be representative, and Barclays maintains separate indices for maintaining Municipal-only portfolios.

See also

References

  1. ^ "Barclays Agg Had Modest Origin".  
  • Richard A. Ferri, All About Asset Allocation, McGraw-Hill, 2006, ISBN 0-07-142958-1

External links

  • Investopedia
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