@article {Konstantinov91, author = {Gueorgui Konstantinov}, title = {On the Dynamics of EMU Bond Portfolios: Is the Diversification of Risk Factors Driving to Convergence of Fund Exposure?}, volume = {26}, number = {2}, pages = {91--101}, year = {2017}, doi = {10.3905/joi.2017.26.2.091}, publisher = {Institutional Investor Journals Umbrella}, abstract = {We show that the persistent style of European Monetary Union (EMU) bond portfolios generates significant crowdedness in common factors{\textemdash}curve level and steepness. Despite fund categorization, our results suggest that bond portfolios show low risk-factor diversification. However, we found less-crowded trades that deserve investors{\textquoteright} attention and could improve diversification. In line with previous research, we argue that a transitory shift from the current levels of crowdedness and risk factors in the EMU is imminent and almost inevitable. Finally, we propose a framework for analysis that ide.tifies crowdedness, helps monitoring of the exposure at risk, and suggests investment process enhancements, which could improve investors{\textquoteright} diversification.TOPICS: Fixed income and structured finance, fixed-income portfolio management, developed}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/26/2/91}, eprint = {https://joi.pm-research.com/content/26/2/91.full.pdf}, journal = {The Journal of Investing} }