Fixed income: diversification as a success factor

Research proves it: a multifactor approach offers investors greater diversification in terms of the universe and the risk and return profile of funds, compared to traditional fundamental managers.

We have been managing multi-factor corporate bond strategies with individual risk/return profiles for the investment grade and high yield segments for over 15 years. Thanks to our many years of experience, our models and processes reflect the learning curve over various market cycles. They incorporate factors that reflect stable economic relationships over the long term and whose predictive power has been historically proven.

Investment Grade CREDIT

Using scientifically proven sources of return 

Our investment grade credit strategy combines the factors value, momentum and carry. These factors have emerged as statistically significant indicators of alpha over many years of research and form the basis of our forecasts.

The key points of the strategy

• Factor-based valuation: we use factors to determine whether a bond is attractive.
• Systematic portfolio construction: this allows us to compare the risk/return profile of different bonds. 
• Risk modelling: To take the risk of bonds into account in portfolio construction and to avoid rating downgrades, risk models complement our return forecasts. 

Our credit strategy can be implemented in different investment universes and can be flexibly adapted to individual ESG requirements.

High Yield

Exploiting opportunities – Reducing risks

The high yield strategy focuses on corporate bonds with ratings BB and B in the “sweet spot”. Our proven factor model is used to evaluate the individual bonds.

The key points of the strategy

• Bonds in the “sweet spot” avoid extremes: we avoid bonds with very high credit spreads as well as bonds with particularly low spreads. This reduces risks and ensures efficient capital allocation. 
• Diversification: To avoid cluster risks, we limit the weight of individual issuers. In addition, we allocate equal risk weights across sectors to achieve optimal diversification.
• Multi-factor approach: Our factor model is tailored to the high yield segment and uses the factors value, momentum, quality and carry.

We can implement the strategy integrating ESG-criteria in a variety of investment universes.

Aggregate

Combined expertise

The aggregate strategy invests in government and corporate bonds. We evaluate each bond’s return potential with our proven multi-factor model.

The key points of the strategy

• Multiple sources of return: To identify opportunities, we use our proven multi-factor model with the factors value, momentum and carry, as well as further economic indicators for interest rate forecasts. 
• Broad diversification: The strategy diversifies across bond segments and interest rate markets. 
• Optimised duration: We position the duration within the yield curves of the various currencies and countries for optimized interest rate management. 

The aggregate strategy can be implemented ESG-compliant in several investment universes.

MinRisk

Diversification and risk reduction

The so-called “low volatility” anomaly from empirical capital market research describes the observation that a lower risk does not have to go hand in hand with a lower return. The Quoniam MinRisk strategy positions itself specifically in the middle of the risk spectrum, because this is where there is the highest probability of a coincidence of controlled risk and positive return.

The key points of the strategy

• Risk reduction: we aim for low volatility in the overall portfolio. 
• Broad diversification: the MinRisk approach limits the maximum size of individual issuers, countries and sectors. The more even weighting means that there are fewer cluster risks. 

The MinRisk strategy is often combined with other strategies. For example, as an Investment Grade MinRisk strategy or as High Yield MinRisk strategy.

Defensive

The alternative to money market

The defensive strategy offers institutional investors an interesting alternative to money market investments. “Defensive” stands for reduced duration. To reduce the risk of loss in the event of a rise in the general level of interest rates, we reduce the duration of the portfolio via exchange traded interest rate futures. Further advantages arise in combination with our MinRisk approach. 

The key points of the strategy Credit MinRisk Defensive

• Low duration: The initial portfolio is a corporate bonds portfolio with medium term maturities. After the duration hedge with interest rate futures, corporate credit risk remains as the source of return.
• Broad diversification: the MinRisk approach limits the maximum size of individual issuers, countries and sectors. 
• High liquidity: All bonds can be sold within a short period of time. 

The defensive strategy can be used in combination with various investment strategies.