Quantifying Alpha of Active Managers: A Case Study on Factor-Based Performance Attribution in Fixed-Income

This paper contributes to the ongoing debate of whether active investing is still worthwhile in presence of factor investing. It provides a universal framework that selects presumably factor-heavy fixed-income funds. To test the framework, returns of an exemplary fund are neutralized for factor exposures. Roughly 60% of returns are attributed to factors and the remaining 40% are interpreted as the manager's alpha. While these results are only valid for this particular fund, the analysis provides a better understanding of the active/passive discussion in fixed-income and contributes worthy insights to the fund manager selection and performance evaluation literature and practice.