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Managing high yield public small caps with Robeco’s corporate bond selection model COALA

Managing high yield public small caps with Robeco’s corporate bond selection model COALA

01-10-2010 | Research
Generating benchmark-like returns is a difficult job in the High Yield corporate bond market. High index turnover and illiquidity, i.e. high bid-ask spreads, are the main reasons why passively tracking a High Yield index comes at significant costs.
  • Patrick  Houweling
    Executive Director, Researcher & Portfolio Manager Quantitative Credits
  • Sander  Bus
    Head of Credit Investments

In this note we show that Robeco's corporate bond selection model COALA is very well able to keep up with its benchmark, after taking index turnover, transaction costs and illiquidity into account. Besides, by applying the model to a specific segment of the High Yield market - small caps with publicly listed equity - we gain access to a long-term source of smart beta. Robeco's High Yield Bonds fund benefits from this smart beta effect by investing in public small caps using the COALA model. 

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