By continuing on this site you have agreed to cookies being placed and accessed by this website. More information and adjusting cookie settings.
Allocation to factors has become increasingly popular in recent years, but practical implementation remains a puzzle for many investors. Avoiding unintended factor biases often ranks amongst their top concerns.
Well-established factors, such as Low Risk, Value, Momentum and Size, generate economically meaningful and statistically significant premiums in credit markets. However, the peculiar structure of these markets entails challenges when it comes to implementing a strategy. We spoke with Mark Whirdy of our Factor Credits team about the way Robeco addresses these issues.
Robeco today announces the appointment of Peter Walsh as Head of its UK business. In this role Peter Walsh will lead the overall sales and marketing efforts for the Robeco UK office and will also have responsibility for the operational management of the UK office.
2016 was a very strong year for global high yield. Spreads tightened from 650 basis points to 400 basis points. The total return for the asset class was 15.0%, making it the best performing fixed income asset class in 2016. Out outlook for 2017 is more conservative, especially since we are so late in the credit cycle already.
Risk management plays a central role in our Core Quant strategies. Key element is that we distinguish between risks we take to enable long-term risk-adjusted outperformance on the one hand, and unrewarded risks that we avoid on the other.
Robeco views sustainability as a long term-driver of companies’ performance. In a recent study, we find that miners with lower emissions per unit of material produced are also miners with a lower cost base. As investors, we therefore regard emissions per production unit as a valuable indicator of miners’ competitiveness.
In a previous study, Cremers showed that high active share funds (funds where the holdings differ substantially from those of their benchmark) beat the market on average, while low active share funds (closet indexers) do not. In this follow-up study* he shows that, among high active share
Trump’s election will lengthen the business cycle, overheat the US economy and might trigger more Fed rate hikes. Corporate credit quality keeps deteriorating. Still, we need a bigger shock than Trump to derail global credit markets. The Fed might do it in the medium term. We remain positioned close to a neutral beta while trading the ranges in the short term.
It has been an eventful ten years for emerging markets. Marked by the rise of China, political turmoil, seesawing commodity prices, but also growth and positive market returns, according to Jaap van der Hart, portfolio manager of Robeco Emerging Stars Equities.
The recent rise in yields has boosted the performance of financial credits, the subordinated segment in particular. The insurance sector in particular can act as a great hedge for further rising yields, if and when this occurs.
Factor investing is becoming mainstream, but not everyone agrees on how it is defined, or what factors should be used. A recent round table by Pensions Age magazine brought together leading proponents in the field, including Joop Huij, head of factor investing research at Robeco.
Nobel prize laureate Eugene Fama (pictured) and fellow researcher Kenneth French have revamped their famous 3-factor model by adding two new factors to analyze stock returns: Profitability and Investment. But this 5-factor model raises many questions.
President Trump will have to deal with many well-known acronyms when he takes office, including NAFTA and NATO. But here's a new one that is rather more difficult to pronounce, and which will worry markets rather more: WSDKWTWD.
A sound corporate risk oversight is relevant for the investment process in various ways. As risk taking can lead to both profits and losses, it’s important for investors to gain insight in the specific risks that are relevant for companies and the type of policies they use to mitigate those risks. The board of directors is responsible for determining the company’s risk appetite and overseeing that management has taken adequate risk management policies and procedures.
One of the biggest challenges facing fixed income investors today is how to achieve attractive returns in a dysfunctional market environment. In such a climate, global, unconstrained credit strategies can prove their worth, as they have the freedom to pursue opportunities throughout global credit markets, without being limited by traditional benchmarks.
One of the explanations for the low-volatility anomaly is that stocks with lottery-like characteristics (a small chance of experiencing a large positive payoff) are overpriced. This paper finds a similar result for stock options. The authors find that the degree of lottery-like features can explain differences in expected option returns between 10% and 50% per week.
The EU is pro-actively developing Europe-wide pension solutions with a view to supporting multinational companies, pension providers and individual citizens. New EU rules will make setting up and running cross-border occupational pensions funds (IORP) an even more realistic option. The proposed Personal European Pension Plan (PEPP) is an easy and cheap solution for individuals wishing to save.
The UN has released the Sustainable Development Goals, asking the private sector to contribute as well. Asset managers such as Robeco cannot only make an important contribution, they can also benefit from the investment opportunities that arise.
Fundamentals have deteriorated and credit valuations are not very appealing either. But that does not matter anymore. There is only one trade and that is the Central Bank. Although we would rather be underweight risk, this very strong technical support keeps us neutrally positioned.
Value investing has been researched extensively in equity markets and has recently been shown to exist in credit markets as well. In our fundamental Global Credits strategy, the Value factor also plays an important role. Here we look for cheap stocks with strong mean reversion potential.
Every year Robeco takes a fresh look at the outlook for the global economy over the next five years. Our analysis gives a prognosis for the major asset classes and three potential scenarios (baseline, stagnation and high growth).
A recent study suggests that sector investing does as well or even better than factor investing in a long-only context. We challenge this conclusion and show that an explicit allocation to well established factors yields better results than allocation to sectors.
Smart beta indices are a popular way of implementing a factor investing strategy. However, research suggests that this may not the best way, as the factor exposure provided by popular smart beta strategies varies greatly and they do not unlock the full potential of factor premiums.
Factor investing – the investment strategy that aims to capture ‘hidden’ returns in financial markets – is rapidly gaining in popularity. However, it is important to follow the right factors, and to be wary of one factor counteracting another, to get the best results. Otherwise, investors might follow generic factor strategies that expose them to risks that are not properly rewarded, resulting in inferior performance.
Research shows that factor investing strategies work well in corporate bonds, but actually building a portfolio requires greater care due to liquidity issues, Robeco’s quantitative experts argue in a new white paper.
Oil is losing its power to shock as its risks have been better discounted into financial markets, while the passing of time will bring the positive impact of lower oil to the fore, says Robeco’s Lukas Daalder.
Fears that the credit markets will be adversely affected much further by a Brexit are overblown, or at least have been priced in to a certain extent, as fundamentals are unchanged, says portfolio manager Victor Verberk.
If you believe in the January effect – the predictive power of the returns of the first month for the rest of the year – it is clear that 2016 is not going to be a very pleasant experience for a substantial part of the financial markets.