Multi-Factor Fixed Income
Key points:
- Robeco has been using factor models in credit management since 1999.
- Within fixed income, we apply factor strategies to the investment grade, high yield credit and government bond universes.
- Factor investing aims to deliver attractive returns over a full market cycle, style diversification, and can be combined with factor investing in equities.
Philosophy
Robeco’s quantitative investment strategies are based on the following beliefs:
Evidence-based research. Identifying factors that are rewarded with increased risk-adjusted performance. This includes extensive empirical testing over longer periods and in different markets.
Economic rationale. We want to move beyond statistical patterns and understand the economic drivers behind factors. We enhance quantitative factors to avoid unrewarded risks.
Prudent investing. We manage easily explainable portfolios and prevent unnecessary trading costs, and we integrate environmental, social and governance (ESG) factors.
Process
Robeco’s factor investing strategies in fixed income exploit the low-risk, quality, value, momentum and size factors. Rather than using generic factor definitions, they use enhanced definitions to avoid unrewarded risk and maximize risk-adjusted returns.
Factor investing strategies in fixed income are aimed at achieving increased risk-adjusted returns over a full market cycle. This means outperformance with market-like volatility or market-like returns with lower risk. In these factor investing strategies, the exposure to bonds that score well on factors is optimized, while liquidity, turnover and transaction costs are carefully managed. For high yield and investment grade credit factor strategies, Robeco’s credit analysts perform additional checks on non-quantifiable risks that our model is unable to assess.
Team
Robeco has a dedicated team of experienced portfolio managers and quantitative researchers for its factor-based fixed income strategies. They cooperate closely with our fundamental credit portfolio managers and analysts and with our quantitative equity researchers.
