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Factor investing in equities has proven effective by systematically identifying and targeting return drivers that are different from the broader market. But, how do regions vary? In this article, portfolio manager Johannes Lins, CFA, explores the differences in factor performance between three common investment regions and looks at why emerging market factor portfolios pull ahead of the pack.

Donald Trump is the 47th President of the USA. With a clearer than expected result, the Republican candidate defeated his Democratic rival Kamala Harris and will probably be able to govern uncontested due to the majority in Congress. What can we expect for the USD investment grade (IG) credit asset class as a result and how will factor approaches deal with the expected change in policy?

Following the announcement of the president-elect, equity markets responded with a historic rally – the largest one-day post-election move on record – signalling investor optimism and a recalibration of expectations for the future. In this equity commentary, portfolio manager Rocio Muniz discusses the initial market reactions and the outlook for sectors and styles in the context of new policies.

On November 5, 2024, a new US president will be elected. Will we see a continuation of the Trump presidency – after a 4 year break – or will the Democrats retain the presidency? And, probably more important for fixed income investors, will the new president also have the majority in congress and therefore the ability to implement his/her policies without having to compromise?

In September 2024, the Fed began its cycle of interest rate cuts. Interest rates fell across the board and prices for risk assets rose. While the Fed is walking a fine line between supporting the economy and avoiding a resurgence of inflation, the current policy has triggered short-term euphoria, as Dr Harald Henke explains in his market commentary.

As the economic landscape shifts and valuations appear more attractive, small caps may be poised to outshine their larger counterparts. Mark Frielinghaus, CFA, answers the question of whether this could be the moment when strategic investments in small caps yield significant returns. Quoniam’s systematic approach may be the key to unlocking hidden value in this underexplored segment.

There’s been a noticeable increase in demand for corporate bonds following the rise in interest rates in 2022. While yields of less than 1% on euro-hedged credit indices were pretty much the norm in previous years, yields of 4% and more are now being achieved on individual corporate bonds. In turn, demand for corporate bonds has increased. Dr. Harald Henke takes a look at the benefits of investment grade (IG) credit and why now is a good time to consider systematic approaches to investing in the global corporate bond market.

Dr Axel Groß-Klußmann in Quoniam’s team Research Forecasts set out to find the best approach to analysing daily news sentiment scores for over 1,000 economic topics. The neural network models are competitive when it comes to explaining stock market movements, currency changes, bond yields and predicting economic growth. His work has recently been published in Digital Finance.

In view of the current risk premiums for high-yield bonds and the less dynamic development of the global economy, investors are asking themselves whether high-yield bonds currently represent an attractive investment opportunity. Dr Veronika Herzberger, CFA, Head of Fixed Income Portfolio Management, explains the head winds and tail winds for high yield bonds and where the sweet spot lies for investors.

The low volatility anomaly explains the advantages of low volatility investing. An additional benefit: The lower the volatility, the greater the compounding of portfolio returns. In their new white paper, Carsten Rother and Dr Xavier Gerard, CFA, find that using a low volatility approach in emerging markets can significantly reduce the risk of the market portfolio, making the compounding effect exceptionally powerful.

As market concentration continues to rise, investors are asking: How can active management deliver? Quoniam’s equity portfolio managers Andjelka Bannes, CFA, and Mark Frielinghaus, CFA, analyse the active performance of global equity managers over the past five years against a backdrop of increasing market concentration providing new insights and practical strategies for navigating index concentration and improving portfolio resilience.

After the first quarter of 2024 saw a dramatic pricing out of aggressive central bank rate cuts, the first ECB rate cut and a bottoming out of spreads in the second quarter made it clear that the end of the interest rate cycle has been reached. More volatility lies ahead.

EUR credit spreads have historically been lower than USD IG credit spreads, with the exception of the euro debt crisis period. This has changed since 1Q2022. Dr Harald Henke, Head of Fixed Income Strategy, explains this reversal from previous trends and looks at what factors might be driving this divergence.

The Quoniam Fund Selection SICAV – Euro Credit EUR A dis has been awarded as winner in the category “Best Bond Global Corporates EUR Fund Over 10 Years” by the LSEG Lipper Fund Awards United Kingdom 2024.

Many of our clients have asked us what positioning the various equity factors of our factor investing strategies suggest in the current market environment. Our portfolio manager Andjelka Bannes, CFA, shares and explains our findings on growth, quality, value and low-volatility equities in the context of dynamic markets.

The era of easy money with negative interest rates and central bank bond-buying programmes is over. Going forward, market forces will play a more important role when determining asset prices and assessing risks and opportunities in markets. The investment implications are profound – and should favour quantitative approaches.

Stubbornly high inflation led to rising interest rates and diminished expectations of rate cuts in the first quarter of 2024. Nevertheless, credit spreads continued to tighten. Systematic credit factors point to a more cautious positioning.

Artificial intelligence is seen as a major investment opportunity in 2023, but it’s also a technology that investors can use in their investment process. Machine learning is one form of AI that we’ve been using at Quoniam for a long time. Here we speak to Dr Maximilian Stroh, CFA, Head of Research at Quoniam, about what machine learning is, its benefits and how we use it at Quoniam.

The Diversity Project Europe (DPE) today announced the first strategic research partnership of its kind with leading consulting firm PwC Switzerland. The project aims to determine the current state of diversity, equality and inclusion in the European asset management industry and to conduct a maturity assessment.

Since its inception in 1909, this day has been a testament to the indomitable spirit of women worldwide. As we commemorate their achievements, we’re reminded of the hurdles they’ve overcome in fields like data science, mathematics, finance, and investment, and use this as our inspiration to effect change in the broader industry, and to ensure such barriers do not exist at Quoniam.

Credit spreads experienced significant volatility in 2023 and ended the year very favourably, delivering reasonable returns on the back of a strong rebound in the carry factor. There are good reasons to believe that the next few years will offer a supportive market environment for factor strategies.

The identification of liquidity is a key factor for successful corporate bond management. In this white paper, we show how the incorporation of pre-trade liquidity data into the portfolio construction process provides more precise estimates of tradability, tradable volumes, and transaction costs. It also increases relative portfolio performance.

In contrast to the pessimistic market forecasts, 2023 proved to be an exceptionally positive year for the stock market. In this article, we break down the performance of different sectors, regions, sizes, and styles to understand the driving forces behind the market boom. Additionally, we look ahead to the next year with a view on current valuations and earnings forecasts.

Interest rates and spreads fell sharply in the fourth quarter. Expectations of rate cuts and hopes of a soft landing for the US economy have boosted markets. Is this a realistic scenario or are investors looking at the markets through rose-tinted spectacles?

Can investors in corporate bonds do good and earn an attractive return at the same time? That was what Quoniam experts Dr Desislava Vladimirova and Dr Jieyan Fang-Klinger set out to determine in their recent research paper, Bonds with Benefits: Impact Investing in Corporate Debt, recently published in the Financial Analyst Journal. We spoke to them about their research, what they found and what it means for investors.

In the ever-evolving landscape of investment strategies, one approach is gaining significant attention for its potential to improve returns – the 130/30 quantitative strategy. This investment approach blends the best of both worlds, offering investors a unique combination of risk management, adaptability, and performance. In this interview, Andjelka Bannes, CFA explains the benefits of the strategy, how it works in practice and how it has performed.

Stubborn inflation, hawkish policies and recessionary trends – Dr Harald Henke examines the growing challenges facing fixed income markets and offers ideas on how investors can position themselves in the current market environment.

Too big to ignore, yet unpopular as rarely in years, if not decades: Investing in China, whether through the stock market or direct investment, is currently out of fashion. In this article, Mark Frielinghaus describes the background to the current scepticism about investing in China and how investors can position themselves in such an environment.

How can sustainable investing be objectively measured? This question is being asked by an increasing number of institutional investors who want to make their portfolios sustainable. Together with Effectual Capital, Quoniam is implementing a unique investment approach based on the sustainable return developed by Effectual. Andreas Gintschel, Managing Director of Effectual, and Jonathan Clenshaw, CSO & CMO of Quoniam, explain what makes this approach unique.

Academic research is plentiful, but do theories work in real portfolios? Quoniam’s research team has launched a new seminar series to increase the exchange between financial researchers and quant practitioners. Halfway through the series, Dr Tamas Barko, organiser of the series, reflects on the lessons learned from the first sessions and the benefits of engaging with universities for research-driven asset managers.

Investors who want to measure the selection performance of a credit portfolio are often confronted with the problem of having to make a simple but sufficiently precise measurement of this performance. Dr Harald Henke shows a way to achieve such a measurement.

Together with Effectory, one of the leading employee feedback providers, Quoniam ran an employee engagement survey in 2022. We are proud to announce that the feedback our employees provided confirmed that Quoniam is an excellent place to work and that we have been awarded the Effectory World-class Workplace Award for Best in DACH 2022-2023.

A new megatrend, artificial intelligence (AI), has so far dominated stock markets in 2023. AI is another catalyst for the historic wave of concentration in global equity markets. Historical comparisons show the extent to which the market is currently being driven by a single theme.

Are resurgent inflation concerns and the increasingly inverted yield curves indicators of an impending recession – or can the economy and a strong labour market hold out? Dr Harald Henke explains what conclusions can be drawn from the current market situation.

Equity markets have been boosted by liquidity, but high valuations suggest a potential for a pull back. The Fed’s fight against inflation is being undermined by weakness in regional banks and the wage-price spiral, which adds to inflationary pressures. In our market commentary, we draw parallels with historic valuations and explore central banks’ position in the current economic environment.

Jonathan Clenshaw will assume responsibility for sales and marketing activities as Chief Sales Officer & Chief Marketing Officer (CSO & CMO) as of 1 July 2023 and, subject to regulatory approval, will join the executive board of Quoniam Asset Management GmbH.

What is the ex-ante impact of different sustainable investment approaches on the alpha of a credit portfolio? And what can investors do who want both outperformance and sustainable credit investments? Credit factor investing provides a framework and a solution to both questions.

The Quoniam Fund Selection SICAV – Euro Credit EUR A dis has been awarded as winner in the category “Best Bond Global Corporates EUR Fund Over 10 Years” by the Refinitiv Lipper Fund Awards United Kingdom 2023.

The market has been oscillating between recession and inflation concerns for several quarters. With the banking crisis in March 2023, the trend is clearly moving towards recession. This is also reflected in the interest rate expectations of market participants. Investors can tilt their portfolios towards this scenario.

Andre Fröhlich, Head of Research Technology at Quoniam, and Prof Dr Stephan König from Hannover University of Applied Sciences and Arts researched which prototypes of a cloud data warehousing architecture work in practice. We spoke with them about the advantages of a cloud architecture in investment research, the results of their research and the future relevance of this topic for Quoniam.

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 Lins 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 Fixed Income Portfolio Management 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, Dr 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.