Multi-Factor Credits
Key points:
- Robeco has been using factor models in credit management since 1999
- Offers balanced exposure to factors in the investment grade bond universe;
- Strive for attractive returns over a full market cycle, style diversifier, can be combined with equity factor investing
Philosophy
Robeco’s quantitative investment strategies are based on the following beliefs:
Evidence-based research. We strive to identify factors that are rewarded with superior 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 that attempt 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
The multi-factor credits strategy is a quantitative credit strategy that aims to exploit the low-risk, quality, value and momentum factors. Rather than using generic factor definitions, it uses enhanced definitions that attempt to avoid unrewarded risk and maximize returns.
Size is taken into account when constructing the portfolio by overweighting the bonds of small firms and underweighting the bonds of large firms. The strategy aims to achieve outperformance with market-like volatility over a full market cycle. The portfolio’s exposure to high ranking bonds is optimized, while managing liquidity, limiting turnover and reducing transaction costs. Robeco’s credit analysts perform additional checks on the 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 credit strategies. They closely cooperate with our fundamental credit portfolio managers and analysts, and with our quantitative equity researchers.
