What is an example of a credit strategy in bond investing?

Choosing bonds based on relative value exemplifies a credit strategy in bond investing because it involves assessing the credit quality and valuation of different bonds to make informed investment decisions. This approach requires analyzing various factors, including the issuer's creditworthiness, the bond's yield relative to its risk, and prevailing market conditions. By focusing on relative value, investors can identify bonds that may be undervalued or overvalued compared to similar securities, allowing for strategic investments that seek to enhance returns based on credit analysis.

In contrast, investing equally across all sectors does not take into account the specific credit risks and opportunities within individual sectors. Focusing solely on high-yield bonds may limit the investor's diversification and exposes them to a higher credit risk without considering relative value metrics. Adopting a passive management approach typically involves less hands-on analysis of individual bond valuations and credit strengths, which is not a characteristic of an active credit strategy. Hence, selecting bonds based on relative value is a distinctive and effective credit strategy that recognizes the importance of nuanced credit assessment in bond investing.