frankrijkfr
Customizing Core Quant Strategies

Customizing Core Quant Strategies

20-02-2017 | Vision
Robeco’s Core Quant equity strategies exploit Value, Quality and Momentum factor premiums, combined within a transparent portfolio algorithm designed to consistently outperform the market. But what if an investor is interested in a portfolio solely focused on the European stock market? Or what if that client is also looking for a way to reduce the carbon footprint of their investments?
  • Wilma de Groot, PhD
    Wilma
    de Groot, PhD
    CFA, Executive Director, Head of Core Quant Equities

To address these issues, Robeco enables investors to adjust their strategies according to a series of parameters. This feature is not new but it has become increasingly popular over time. “We offered the possibility to customize our strategies from the very beginning in 2002,” says Wilma de Groot, a portfolio manager of Robeco’s Quant Equities team. “However, we’ve definitely seen a growing number of specific requests from clients in recent years.”

For almost 15 years, Robeco has designed custom-made quant strategies, in close cooperation with its clients. Our proprietary portfolio Customizing Core Quant Strategies algorithm features a flexible set-up, so we can easily adapt to a variety of individual requirements. Based on this experience, we highlight three main areas of possible customization: the investable universe, the risk-return profile and the integration of sustainability criteria.

Defining a precise pool of investable stocks is certainly the most obvious way to adjust a portfolio to a specific need. Core Quant strategies can be applied to a variety of universes, as long as these remain broad enough to enable capturing factor premiums. As a result, portfolios can easily be geared to a particular geographical region or a certain group of business sectors, for example.

Restez informé sur l'investissement quantitatif
Restez informé sur l'investissement quantitatif
Inscrivez-vous

Adjustable risk-return profile

But the customization of our Core Quant strategies can go well beyond the definition of a restricted investment pool. By allowing a long only portfolio to deviate more or less from its benchmark, its expected tracking error can also be adjusted by between 0.5% and 5%.

Portfolios with tracking errors up to 1.5 percentage points are very good substitutes to passive strategies, as they aim to generate at least market like returns. “This is particularly relevant for investors looking for alternatives to passive strategies, which inevitably underperform the market once trading costs are taken into account,” says De Groot.

Portfolios with greater tracking error flexibility are more suitable for clients who aim to capture more of the factor premiums in a consistent way. Our research shows that the looser the tracking error criteria, the higher the expected returns tend to be.

We can implement stricter sustainability standards without losing too much factor exposure

Flexible sustainability integration

Another area of customization is sustainability. All of Robeco’s quantitative equity strategies integrate ESG scores, based on RobecoSAM’s annual Corporate Sustainability Assessments. For all portfolios, we ensure ESG scores are at least higher than the benchmark’s own score.

Moreover, all our funds comply with Robeco’s general exclusion policy. But this is just a starting point. Depending on their own preferences, investors can request stricter criteria. This can be done, for example, through the use of client-specific exclusion lists. Targeting precise objectives, such as reducing carbon footprints is also possible.

Tighter investment rules and smaller stock pools obviously have an impact on a portfolio’s exposure to factors premiums. However, this relationship is not linear because our approach to sustainability ensures that we prioritize the selection of sustainable stocks with the best possible momentum and valuation characteristics. “That’s why we can implement stricter sustainability standards without losing too much exposure to factor premiums,” says De Groot.

This article was initially published in our Quant Quarterly magazine.

Information importante

L’information publiée dans les pages de ce site internet est plus particulièrement destinée aux investisseurs professionnels.

Certains fonds mentionnés dans le site peuvent ne pas être autorisés à la commercialisation en France par l’Autorité des Marchés Financiers. Les informations ou opinions exprimées dans les pages de ce site internet ne représentent pas une sollicitation, une offre ou une recommandation à l’achat ou à la vente de titres ou produits financiers. Elles n’ont pas pour objectif d’inciter à des transactions ou de fournir des conseils ou service en investissement. Avant tout investissement dans un produit Robeco, il est nécessaire d’avoir lu au préalable les documents légaux tels que le document d’information clé pour l’investisseur (DICI), le prospectus complet, les rapports annuels et semi-annuels, qui sont disponibles sur ce site internet ou qui peuvent être obtenus gratuitement, sur simple demande auprès de Robeco France.

Nous vous remercions de confirmer que vous êtes un investisseur professionnel et que vous avez lu, compris et accepté les conditions d’utilisation de ce site internet.

Je n’accepte pas