TY - JOUR T1 - Using Prime Alpha to Separate Skill from Luck in Fixed-Income Strategies JF - The Journal of Investing SP - 102 LP - 109 DO - 10.3905/joi.2017.26.2.102 VL - 26 IS - 2 AU - Andrew Chin AU - Piyush Gupta Y1 - 2017/05/31 UR - https://pm-research.com/content/26/2/102.abstract N2 - We assess the existence and persistence of manager skill using a unique and broad database of institutional manager returns within the U.S. fixed-income universe. We define prime alpha as the residual return after adjusting for the main fixed-income factors (credit and duration) and find that it is persistent across time. Prime alpha is a strong indicator of manager skill because managers with high prime alpha tend to continue to exhibit high prime alpha. We also show evidence that raw manager returns are not persistent because they are influenced by the cyclical nature of factor returns.TOPICS: Fixed income and structured finance, portfolio theory ER -