A Canadian portfolio manager employs a 'barbell strategy' for a fixed-income portfolio. Which of the following best describes this approach?

Question: A Canadian portfolio manager employs a 'barbell strategy' for a fixed-income portfolio. Which of the following best describes this approach?

Answer options: ✅ Concentrating bond holdings at both the short and long ends of the yield curve, avoiding intermediate maturities.

• Investing primarily in bonds with intermediate maturities to balance risk and return.
• Holding only short-term government bonds to minimize interest rate risk.
• Focusing on high-yield corporate bonds across all maturities for maximum income.

Correct answer: Concentrating bond holdings at both the short and long ends of the yield curve, avoiding intermediate maturities.

Explanation: A barbell strategy involves investing in bonds with very short and very long maturities, while avoiding intermediate maturities. This strategy can offer both liquidity and potential for higher long-term returns, with less exposure to changes in the middle of the yield curve.