Pooled bonds not a bad idea
On the subject of diversified bond portfolios, it is worth mentioning that recent academic research has shown that the highly skewed return profile of corporate credit risk requires a portfolio of around 500 bonds to remove non-systemic or idiosyncratic risk. This is virtually impossible to achieve, even for institutional investors.Some researchers have pointed to the much maligned CDOs as a good example of how to structure a well diversified corporate credit risk portfolio. But even the best of these contained no more than 150 individual names.While it will be beneficial for retail investors to have access to corporate bonds and fixed interest as an asset class because of the stability that it can bring to a portfolio, there will clearly be a need for investor education. Retail investors will need to be well aware of the peculiarities of fixed interest and the difference between fixed and floating rates of return, the highly skewed risk profile of corporate bonds and the difference between investment grade and non-investment grade or even unrated corporate bonds, and then all the various features that can be imbedded in bonds, taking them away from plain vanilla.