Corporate Bond Mutual Funds and ETFs – The Role of Factors

Investors have many options nowadays to invest in corporate bonds. Most investors opt for fundamentally managed active mutual funds, but with the rise of passive investing, also market-tracking exchange traded funds (ETFs) have become popular investment vehicles. An important finding in the equity literature is that a substantial part of the mutual fund’s performance can be explained by factor exposures. Well-known factors are Value, Momentum, Size and Low-Risk. The literature for other markets, such as corporate bonds (credits) or commodities, is still limited.

The goal of this research project is to investigate the performance of corporate bond mutual funds and ETFs. In particular, the question is whether these two types of investment vehicles bring the investor any alpha, before but also after fees. Moreover, can we also attribute dispersion in mutual fund performance to differences in factor exposures? Finally, are factor exposures also predictive for future fund performance?

The project covers the entire quant model development cycle: analyzing the data, programming the back-tests, analyzing the results, discussing results with researchers and portfolio managers, writing a research report and giving a presentation. As with all Super Quant internships, the assignment will be supervised by an experienced empirical researcher of Robeco’s Quantitative Research department. Practical feedback will be provided by several credit portfolio managers. Creative, analytic and programming skills are essential in order to successfully complete the project.

Are you interested?

Let us know your motivation and send it together with your CV and list of grades to SQ@robeco.nl.

References

Van Gelderen, E., & Huij, J. (2014). “Academic Knowledge Dissemination in the Mutual Fund Industry: Can Mutual Funds Successfully Adopt Factor Investing Strategies?”, Journal of Portfolio Management.

Houweling, P. (2012). “On the Performance of Fixed-Income Exchange-Traded Funds”, The Journal of Index Investing.

Houweling, P., J. van Zundert, 2017, “Factor Investing in Corporate Bonds”, Financial Analysts Journal

Israel, I., J. Kang, S.A. Richardson, 2016, “Investing with Style in Corporate Bonds”, working paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2576784