News Hub: Knowledge multiplies when shared

On International Women’s Day, we would like to highlight and celebrate our female colleagues across the company. This matters for our business because every day we experience how diversity and an inclusive working culture enriches Quoniam, improves our decision-making, drives innovation, and enables us to better respond to stakeholders.

In this interview, Desislava Vladimirova provides insights into the trade-off between impact investing and outperformance of credit factor strategies and the possibilities of combining the two.

2022 was a difficult year for active credit managers with high inflation rates, rising spreads and rates, as well as negative risk premia returns. Dr Harald Henke explains how systematic credit factors help up in EUR and global investment grade markets.

The new Quoniam Climate Equities strategy actively captures the opportunities associated with climate change and sustainable transformation. The focus is on companies that are strongly committed to emission reductions. Claudia Röring, Dr Laura Jehl and Johannes Probst explain the benefits of a forward-looking approach.

2022 brought the weakest fixed income returns in decades due to inflation and interest rate increases. In 2023, on the other hand, the focus will be on the economic downturn. If the upcoming recession is not too severe, 2023 could be a good year for fixed income investors.

2022 was a turbulent year for equity markets, with the indices in Europe, the US and the emerging markets correcting significantly. During 2023, all eyes will continue to be on the central banks. In our market commentary, we describe which styles and regions you can still look forward to with optimism.

Dr Volker Flögel assumes responsibility for the investment division as Chief Investment Officer as of 1 January 2023 and joins the Management Board of Quoniam, subject to regulatory approval.

Government bonds plus index CDS – this combination is sometimes marketed as a liquid alternative to corporate bond portfolios. We analyse how the two approaches differ and what risks investors need to be aware of.

Camilla Udd has been Head of Culture, Diversity and Change at Quoniam for a year now. In the interview, she talks about her work in the area of Diversity & Inclusion and explains why diverse teams outperform homogenous teams – provided an inclusive workplace culture is in place.

Dr Jieyan Fang-Klingler, Dr Maximilian Stroh and Frederik Wisser share pioneering insights on the topic of climate data and decarbonisation of portfolios from their new working paper “Back to the Future: The Role of Forward-looking Climate Metrics in Decarbonization Portfolios“. In the interview, they explain their findings and give an outlook on further ESG research projects.

High inflation and a weak economic outlook are forcing central banks to choose between expansionary and restrictive monetary policy. Markets now believe in a hard line to fight inflation. This is likely to trigger a recession in 2023. Nevertheless, corporate bonds look attractive at current levels.

Central bank policy was in focus once again in the third quarter of 2022. Fears that inflation had not yet peaked led to a radical trend reversal in the middle of the quarter and shows that increased volatility results in greater dispersion of factor returns. Hence, risk management is key.

The required changes in the wake of the climate crisis may seem like a (regulatory) burden, but in fact present a massive chance for asset owners and asset managers – not only to support transformation, but also to manage risks and create value.

Despite rallying credit spreads, corporate bond managers on average underperformed in July 2022, while they outperformed in August 2022 despite rising spreads. What is behind this unusual performance pattern?

Empirical evidence shows that credit factor investing has a diversifying effect in an investment grade (IG) credit portfolio. The year 2022 with its extreme market movements is a good test case to revisit the question and ask whether this diversification effect still holds.

Do climate-friendly companies offer a return premium? Should investors rely on past data? Or should they dare a look ahead? Our research experts Dr Jieyan Fang-Klingler and Dr Maximilian Stroh answer these questions.

What does the current market situation mean for liquid instruments? Dr Harald Henke explains to what extent an investment in Euro investment grade corporate bonds makes sense in the scenario with declining inflation and increasing recession concerns.

How is inflation developing? Dr Harald Henke looks at the reactions of the central banks and the associated developments of key interest rates and inflation in the emerging recession with a view to the Eurozone and the USA.

The shift in the role of the central banks has led to a positive price development since the beginning of the millennium, despite several crises. The highly expansive monetary and fiscal policy, combined with the low general inflation rates until recently, has also led to increases in asset prices, some of which have been significant. Thomas Kieselstein, CIO, describes this development and the associated consequences for investors.

Since the beginning of the war against Ukraine, credit spreads have come under pressure. This is particularly evident in EUR investment grade spreads which have widened significantly in this environment.

The investment challenges facing institutional investors are becoming ever greater. In this environment, it is crucial to have an asset manager at your side who offers significantly more than just managing the money. This is what really matters in the future.

Mark Frielinghaus and Dr Oliver Murschall examine the situation of the stock market in the current stagflation environment and look at parallels to the situation in the 1970s. How did different investment styles such as value, growth/profitability, momentum, multifactor and defensive stocks perform in comparable market phases and what conclusions can be drawn about the development of the current stagflation?

Dr Claudia Zunft and Dr Volker Flögel of Quoniam Asset Management teamed up with Prof Dr Christian Schlag from Goethe University Frankfurt to explore the value-added of short-term momentum in factor portfolios. Their work was recently published in the Journal of Banking & Finance.

How can investors rebalance their fixed income portfolios according to environmental and/or social characteristics? In this interview, Dr Veronika Herzberger, Head of Portfolio Management Fixed Income and member of the Quoniam SI Committee, explains what investors should bear in mind and what special features different bond indices have.

The 1970s hold fascinating insights for the current market environment. Dr Harald Henke looks back at historical bond markets in this period of stagflation and answers how a similar scenario might play out today.

As a quantitative asset manager, we translate scientific theory into mathematical and computer models that guide our trading and portfolios. The Technology division has the important task of creating the space for these models to be developed and operated. Data management plays an important role here. In conversation with our Chief Technology Officer, Dr Alexander Beck.

Climate change is the challenge of our time. Companies and investors must address the associated risks, but also want to benefit from the opportunities. In conversation with Dr Laura Jehl, Research Analyst at Quoniam Asset Management, on how to address climate change with a data-driven investment approach.

Emerging markets are considered high risk for a reason: During the past two years alone, we have witnessed the Corona outbreak in China in 2020, the global semiconductor crisis, production failures in Asia and supply chain problems and now the Russian invasion of Ukraine and a war in Eastern Europe.

In the mix of accelerating inflation, slumping growth, aggressive Fed rate hikes and geopolitical turmoil with far-reaching implications for the global financial system, the question is, what’s next for US interest rates.

In the interview, Verena takes us into her varied everyday life in the People & Development team, tells us about a very special moment at Quoniam and shares her hiking tips. 

European small caps and emerging markets stocks can offer attractive returns and alpha opportunities. However due to limited investor attention, these stocks lack liquidity and have higher transaction costs. As part of our Quoniam Doctoral Programme, Kay Stankov researched how incorporating liquidity forecasts into a quantitative investment process can improve returns after transaction costs in these markets.

Dr Theofanis Archontakis provides insights into his work as a multi-asset portfolio manager and talks about the exciting topic of alternative data sources, which particularly engages him at the moment.

Have you been wondering how artificial intelligence can add value in portfolio management? The simplified answer is that it can reveal relationships that are not immediately obvious and provide clues to the most relevant data sets and variables.

At Quoniam, diversity and inclusion are an integral part of our corporate culture. In an interview, we asked our CEO Nigel Cresswell and our CFO and CCO Silke Weiser-Walther what the International Women’s Day on 8 March means to them personally and what Quoniam is doing to promote equal opportunities.

At Quoniam, we stand in solidarity with the people of Ukraine and would like to express our deepest sympathy to all victims of this conflict. From an asset manager’s perspective, we expect that it will permanently change the international security architecture, energy policy, and create significant volatility. The situation is dynamic and fast moving.

How can investors profit from investing in fixed income factor strategies? How does multi-factor credit differ in its characteristics from the fundamentally managed credit funds? Quoniam’s empirical study demonstrates that investors can diversify their overall credit exposure by adding a multi-factor strategy to their fundamentally managed credit allocation.

The Fed has announced an aggressive monetary policy response to current inflation rates with several rate hikes this year. While this has led to rising interest rates, the bond market has also reacted with a dramatic flattening of the curve. The market is critical of the impact of these measures on future economic growth. Is the Fed about to make a mistake?

Rocío talks about her day-to-day life in portfolio management, looks back on 20 years at Quoniam and shares her extensive list of book recommendations.

In conversation with Markus Ebner, Head of Multi-Asset at Quoniam Asset Management.

How can asset managers gain an information advantage in today’s world? One way is to use unstructured data. They provide valuable signals and can thus offer an important investment advantage.

With multi-factor investing, we offer institutional investors a diversifying investment style. In doing so, we rely on a broad, balanced mix of factors. This way, we ensure that your portfolio is not overly concentrated on a single company or factor.

In this interview, Hanna talks about her everyday life as an advisor to institutional investors and explains what makes Quoniam special as an employer.

Inflation and the central banks were the main drivers of bond market dynamics last year. While there was little for investors to gain on the interest rate side, corporate bond investors were rewarded for risks.

There was no talk of a return to normality in 2021 either. But the majority of investors ignored the negative factors and drove the stock markets in the developed countries to new highs. At the same time, the first important trend changes were observed, which are likely to continue in 2022.

Crisis-proof investment strategies are once again in high demand in uncertain times. Investors are looking for attractive returns with low risk.

The US Federal Reserve has made clear announcements about monetary policy in 2022. What does the market expect from the Fed and what impact do the capital markets think this policy will have? An analysis of the market at the end of 2021. 

Excessive liquidity, asset prices at all-time highs and inflation rates of more than five percent: even though the challenges for investors in 2022 are great, returns can still be achieved on the international capital markets with a skilful asset allocation.

The “Promoting Women Export Entrepreneurs” programme seeks to build an ecosystem of women entrepreneurs and supporting them in their access to export markets. 

In this interview, Desislava Vladimirova gives us an insight into her path from working student to permanent doctoral candidate at Quoniam and tells us what makes working in research so exciting.

Factor investing is becoming increasingly popular in the corporate bond market. Academic and practitioner evidence demonstrates that well-known equity factors can be redefined to capture excess returns in global corporate bond portfolios.

This is how the SI team works for the success of your sustainable investments.

By joining the Net Zero Asset Managers Initiative, we commit that our portfolios will be carbon neutral by 2050 or earlier.

Our CEO Nigel Cresswell introduces himself and sets out his plans for Quoniam.

Setting up efficient research in the cloud, migrating tens of thousands of lines of code to Python – and doing it all largely from home? Our research team has made it possible. An interview with Dr Volker Flögel, Head of Research, and Andre Fröhlich, Head of Research Technology.

Diversity unites and is crucial for creative and successful collaboration.

Contrary to the expectations of many market participants, US interest rates fell markedly since the end of Q1/2021 despite macro data in the US pointing in the opposite direction. Market participants discussed several reasons for this move on which we shed a light in this article.

Less risky stocks often achieve higher risk-adjusted returns – a phenomenon called the low-risk anomaly. But is this theory still valid today and what role does it play in the current market environment?

In recent years, researchers have explored sentiment from various media and its usefulness in predicting financial markets. However, macroeconomic forecasting has not yet been a focus. We show how forecasts of industrial production and consumer prices can be improved by applying a new method to incorporate emotions from newspaper articles.

As the economy recovers, voices are getting louder to withdraw monetary policy support. Does this pose a threat of further interest rate hikes? The past years show that US interest rates have risen in phases of bond purchases, but fell when purchasing programmes or the Fed balance sheet were reduced. There is  therefore no indication that a reduction in bond purchases must be negative for bond prices.

Just over a year has passed since the outbreak of the COVID-19 pandemic. While Europe is still in lockdown in many places, the global stock markets have long since reached new highs. Governments and central banks continue to print money on a grand scale, asset prices are rising to record levels and the danger of inflation is increasing. How are equities doing in this environment?

Our new investment strategy offers institutional investors participation in the global equity markets with a focus on companies that make an above-average contribution to achieving at least one of the 17 UN Sustainable Development Goals (SDGs).

For 2021, with interest rates at record lows and tightened spreads, investors are wondering where to turn in order to generate returns in the liquid fixed income universe. We will show that US credit investments offer attractive returns even after currency hedging. Due to a steep US yield curve, the expected return is higher than the current yield.

The variety and quantity of ESG data are increasing rapidly. In this ‘insights’, our ESG experts answer eight important questions on how ESG data has evolved, what challenges institutional investors face and how a quantitative investment approach can give them transparent solutions.

Several challenges make fully systematic fixed income investing different than equity. Below we share what the common challenges* are and how we address them at Quoniam.

Successful patents create a competitive advantage and added value for enterprises. The challenge in portfolio management is to determine the value of such innovations, and to apply this to single-issue share selection. Strategies that buy companies with high patent values and sell those with low patent values generate annual excess returns above 4%.

The use of unstructured data has become increasingly popular over recent years as “traditional” data such as financial ratios or announcements reflects financial markets events, particularly crises, with a time lag. This year’s COVID-19 outbreak is an example that illustrates how sentiment measures derived from newspaper narrative capture these dynamics and generate positive returns.

Comparing the relative performance of Value and Growth stocks, we can see that the gap has widened considerably in recent years – and particularly in the recent past. In phases of recovery or when valuation bubbles burst, Value stocks generate strong outperformance, while cyclical stocks are at risk amid the ongoing slowdown of the real economy.

Across Europe, measures implemented to contain the COVID-19 pandemic are being gradually lifted. Infection rates are decreasing. At the same time, the capital markets are recovering. Thus, we are currently at the crossroads between crisis and recovery. Which is the smarter strategy in such an environment: Growth or Value?

In order to further develop our alpha forecast model we analyse factors that are both expected to show an outperformance and are not correlated to the information previously used. With the information of the short-selling market we have found such a factor and included it in our forecast model.

There is increasing academic and practitioner evidence that well-known equity factors can be used to capture excess returns in global corporate bond portfolios. In this paper we discuss the implications for an asset owner using multiple managers with different alpha sources and styles. We analyse the exposure to the Value, Quality and Momentum factors for three leading fundamentally-managed investment grade credit funds in comparison to the Multi-Factor portfolio of Quoniam.