{"id":263302,"date":"2025-09-16T07:58:19","date_gmt":"2025-09-16T07:58:19","guid":{"rendered":"https:\/\/www.quoniam.com\/?p=263302"},"modified":"2025-11-25T10:06:39","modified_gmt":"2025-11-25T10:06:39","slug":"enhanced-corporate-bonds","status":"publish","type":"post","link":"https:\/\/www.quoniam.com\/en\/article\/enhanced-corporate-bonds\/","title":{"rendered":"Enhanced corporate bonds: Where algorithms meet capital market expertise"},"content":{"rendered":"\n<div class=\"wp-block-group is-style-smallBG\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\">How can an enhanced approach be implemented to reliably offer added value? This is precisely where Quoniam&#8217;s combination of models, infrastructure and experts comes in to play.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Corporate bond enhanced strategies with systematic approaches<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Investors are looking for strategies that deliver added value compared to the benchmark while keeping risk under control. This is particularly important for strategies with low tracking error, as even small deviations can significantly affect the risk profiles and regulatory requirements of institutional investors over the long term.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Quoniam limits the deviation from the benchmark by systematically monitoring clearly defined target tracking errors and applying with science-based forecast models and active risk management. This enables us to target controlled outperformance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.quoniam.com\/en\/article\/passive-vs-indexing\/\">In the first part of our analysis<\/a>, we showed why passive approaches in the corporate bond sector are never entirely passive. To overcome these challenges, it is worth taking a look at the advantages of a systematic approach \u2013 and how the Quoniam Enhanced strategy implements it in practice.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Our process aims to achieve:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Performance advantages<\/strong>: Our goal is gross outperformance of 0.3%\u20130.4% to exceed the benchmark on a net basis and deliver excess returns despite comparable risk.<\/li>\n\n\n\n<li><strong>High risk-adjusted performance:<\/strong> We aim for one unit of gross alpha per unit of tracking error, resulting in an information ratio of 1. This offers investors the highest possible risk-adjusted performance.<\/li>\n\n\n\n<li><strong>Efficient implementation: <\/strong>Low transaction costs are fundamental to the success of enhanced strategies. Our transaction costs are demonstrably below the market average, enabling efficient implementation of the strategy.<\/li>\n\n\n\n<li><strong>Successful risk management:<\/strong> Whether it&#8217;s accurately estimating individual bond risks, forecasting downgrades to the high-yield segment or dealing with company-specific special situations, risk management is part of the DNA of a systematic approach. By avoiding unnecessary risks, we increase the likelihood of outperforming.<\/li>\n\n\n\n<li><strong>Individual solutions:<\/strong> Exclusions from the benchmark, sustainability criteria, maturity or sector restrictions \u2013 Client portfolio remains tailor-made.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Building on this process for day-to-day portfolio management, our approach offers further strategic strengths in risk management.<\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group is-style-smallBG\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\"><strong>Controlled risk dimensions<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A successful enhanced portfolio takes many risk dimensions into account simultaneously \u2013 from interest rate and sector risks to sustainability risks. Specific to an enhanced corporate bond portfolio, this means:<\/p>\n\n\n\n\n\n    <div class=\"accordionWrapper qm-element\" style=\"--color:;\">\n        <ul class=\"accordion\" data-accordion data-allow-all-closed=\"true\">\n                            <li class=\"accordion-item\" data-accordion-item>\n                    <a href=\"#\" class=\"accordion-title\">\n                                                <div> Interest rate risks<\/div>\n                    <\/a>\n                    <div class=\"accordion-content\" data-tab-content >\n                        <div class=\"grid-x grid-padding-x align-top\">\n                            <div class=\"cell small-12\">\n                                <p>How much does the overall portfolio duration deviate from the benchmark, and how much does it deviate within different maturity bands on the yield curve?<\/p>\n\n                                                            <\/div>\n                        <\/div>\n                    <\/div>\n                <\/li>\n                            <li class=\"accordion-item\" data-accordion-item>\n                    <a href=\"#\" class=\"accordion-title\">\n                                                <div> Spread risks<\/div>\n                    <\/a>\n                    <div class=\"accordion-content\" data-tab-content >\n                        <div class=\"grid-x grid-padding-x align-top\">\n                            <div class=\"cell small-12\">\n                                <p>How much do spread and market risk deviate from the benchmark?<\/p>\n\n                                                            <\/div>\n                        <\/div>\n                    <\/div>\n                <\/li>\n                            <li class=\"accordion-item\" data-accordion-item>\n                    <a href=\"#\" class=\"accordion-title\">\n                                                <div> Sector risks<\/div>\n                    <\/a>\n                    <div class=\"accordion-content\" data-tab-content >\n                        <div class=\"grid-x grid-padding-x align-top\">\n                            <div class=\"cell small-12\">\n                                <p>Is the portfolio close to the benchmark in terms of its sector and sub-sector structure?<\/p>\n\n                                                            <\/div>\n                        <\/div>\n                    <\/div>\n                <\/li>\n                            <li class=\"accordion-item\" data-accordion-item>\n                    <a href=\"#\" class=\"accordion-title\">\n                                                <div> Country risks<\/div>\n                    <\/a>\n                    <div class=\"accordion-content\" data-tab-content >\n                        <div class=\"grid-x grid-padding-x align-top\">\n                            <div class=\"cell small-12\">\n                                <p>Is there a high degree of overlap in the country distribution of issuers in the portfolio and benchmark? What is the positioning with regard to emerging market issuers?<\/p>\n\n                                                            <\/div>\n                        <\/div>\n                    <\/div>\n                <\/li>\n                            <li class=\"accordion-item\" data-accordion-item>\n                    <a href=\"#\" class=\"accordion-title\">\n                                                <div> Capital structure risks<\/div>\n                    <\/a>\n                    <div class=\"accordion-content\" data-tab-content >\n                        <div class=\"grid-x grid-padding-x align-top\">\n                            <div class=\"cell small-12\">\n                                <p>What is the allocation to subordinated bonds and their sector distribution?<\/p>\n\n                                                            <\/div>\n                        <\/div>\n                    <\/div>\n                <\/li>\n                            <li class=\"accordion-item\" data-accordion-item>\n                    <a href=\"#\" class=\"accordion-title\">\n                                                <div> Rating risks<\/div>\n                    <\/a>\n                    <div class=\"accordion-content\" data-tab-content >\n                        <div class=\"grid-x grid-padding-x align-top\">\n                            <div class=\"cell small-12\">\n                                <p><span class=\"NormalTextRun SCXW227690700 BCX8\">Is there an overweight <\/span><span class=\"NormalTextRun SCXW227690700 BCX8\">in the<\/span><span class=\"NormalTextRun SCXW227690700 BCX8\"> riskier <\/span><span class=\"NormalTextRun SCXW227690700 BCX8\">BBB rating range? <\/span><span class=\"NormalTextRun SCXW227690700 BCX8\">What is the positioning in bonds that are at risk of being downgraded to high yield?<\/span><\/p>\n\n                                                            <\/div>\n                        <\/div>\n                    <\/div>\n                <\/li>\n                            <li class=\"accordion-item\" data-accordion-item>\n                    <a href=\"#\" class=\"accordion-title\">\n                                                <div> Sustainability risks<\/div>\n                    <\/a>\n                    <div class=\"accordion-content\" data-tab-content >\n                        <div class=\"grid-x grid-padding-x align-top\">\n                            <div class=\"cell small-12\">\n                                <p><span class=\"NormalTextRun SCXW15682839 BCX8\">Is the portfolio <\/span><span class=\"NormalTextRun SCXW15682839 BCX8\">comparable<\/span><span class=\"NormalTextRun SCXW15682839 BCX8\"> to the benchmark in terms of ESG scores, CO2 intensity, controversies, etc.?<\/span><\/p>\n\n                                                            <\/div>\n                        <\/div>\n                    <\/div>\n                <\/li>\n                    <\/ul>\n    <\/div>\n\n\n\n<p class=\"wp-block-paragraph\">The large number of risks that need to be considered simultaneously makes it clear that a systematic approach is advantageous, one in which an algorithm guarantees that all criteria are met simultaneously. Meanwhile, the portfolio manager monitors the optimisation results and supplements the computer&#8217;s precision with human expertise.<\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group is-style-smallBG\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\"><strong>Combining technology and capital market expertise<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A systematic approach combines the strengths of technology-based, automated processes with \u201chuman intelligence\u201d based on capital market expertise. When algorithms outperform humans, computers are used. This is especially true when it comes to the simultaneous and systematic evaluation of large data sets, and it is particularly useful in the following areas:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Automated processes<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Risk monitoring:<\/strong> A large number of risk signals at bond level and for the overall portfolio have to be evaluated every day. Are there any significant deviations from the benchmark or from the previous day&#8217;s values? Algorithms can be set up to compile all anomalies and make them available to the portfolio manager.<\/li>\n\n\n\n<li><strong>Yield forecasts:<\/strong> To achieve outperformance within the risk limits, our models find attractively valued bonds and generates a daily yield forecast for all bonds.<\/li>\n\n\n\n<li><strong>Risk forecasts:<\/strong> To construct risk-adjusted optimal portfolios, a risk forecast for all bonds is also required. This applies to both systematic and issuer-specific risks. Downgrade probabilities can also be easily integrated.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">While models and software handle standard processes, experienced portfolio managers intervene to reduce risk wherever there are special situations that require experience and expertise. These include in particular:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Discretionary elements<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Issuer-specific special situations:<\/strong> A company takeover, a natural disaster or a short seller report: there are many situations in which a model may not have all the information relevant for assessing earnings opportunities and risks. Portfolio managers can assess the respective situation and decide how to proceed with regard to a security&#8217;s deviation risk from the benchmark.<\/li>\n\n\n\n<li><strong>Stress tests and scenario analyses:<\/strong> War in the Middle East with an impact on oil prices, trade wars with varying effects on countries and industries, or elections and referendums \u2013 today, there are many risks lurking beneath the surface of the market that are not always apparent. Through extensive stress tests and scenario analyses, portfolio managers can gain an understanding of the potential impact of certain risks and reduce risk if necessary.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group is-style-smallBG\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<p class=\"wp-block-paragraph\"><strong>Conclusion<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Combining human judgement with the precision of powerful models creates portfolios that have the potential to outperform the benchmark even after costs \u2013 with controlled deviation risks.<\/p>\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group is-style-default\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n\n<div class=\"grid-container InfoBlock qm-element\">\n    <div class=\"grid-x grid-margin-y grid-padding-x\">\n        <div class=\"cell small-12  medium-12 large-4 \">\n                                            <img decoding=\"async\" src=\"https:\/\/www.quoniam.com\/wp-content\/uploads\/2025\/09\/willemse_jorre_kontakt_dialog-448x276-c-default.jpg\" alt=\"\" loading=\"lazy\"\/>\n                    <\/div>\n        <div class=\"cell small-12 medium-12 large-8 text text-left\">\n            <div class=\"InfoBlockContent\">\n                                    <p><strong>Take advantage<\/strong> of our expertise in managing low tracking error corporate bond strategies. Contact us \u2013 together we can develop your tailor-made enhanced solution.<\/p>\n<p><strong>Jorre Willemse<\/strong><br \/>\nHead of Client Relations International<br \/>\nT +44 (0) 203 2162 427<br \/>\n<a href=\"mailto:info@quoniam.com\">info@quoniam.com<\/a><\/p>\n\n                                            <\/div>\n        <\/div>\n    <\/div>\n<\/div>\n\n<\/div><\/div>\n\n\n\n<div class=\"wp-block-group alignfull\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<h6 class=\"wp-block-heading has-text-align-center\"><br>YOU MIGHT ALSO BE INTERESTED IN THIS<\/h6>\n\n\n\n\n<div class=\"smallBGwhite qm-element\">\n    <div class=\"grid-container\">\n    \n        <div class=\"grid-x grid-margin-y grid-padding-x small-up-1 medium-up-3 \">\n                                                                            <div class=\"newsTeaserWrapper cell\">\n                                    <div class=\"newsTeaser \">\n                                        <a class=\"link-overlay\" href=\"https:\/\/www.quoniam.com\/en\/article\/price-shock-physical-scarcity\/\" title=\"From price shock to physical scarcity\"><\/a> \n                                        <div class=\"image\">\n                                            <img decoding=\"async\" src=\"https:\/\/www.quoniam.com\/wp-content\/uploads\/2026\/07\/2026-07_review-HH-448x220-c-default.jpg\" loading=\"lazy\" \/>\n                                            <div class=\"play-button-overlay\"><\/div>\n                                        <\/div>\n                                        <div class=\"info\">\n                                            <div class=\"preHeader\">\n                                                <div class=\"cat\">\n                                                    Article\n                                                    \n                                                <\/div>\n                                                <div class=\"date\">\n                                                    July 2026\n                                                <\/div>\n                                            <\/div>\n                                            <div class=\"headline\">From price shock to physical scarcity<\/div>\n                                            <div class=\"introText\">\n                                                                                                    <p>Commodity shocks are usually assessed through prices and inflation. 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This is precisely where Quoniam&#8217;s combination of models, infrastructure and experts comes in to play. Corporate bond enhanced strategies with systematic approaches Investors are looking for strategies that deliver added value compared to the benchmark while keeping risk under control. This is particularly [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":263282,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_robots_primary_cat":"none","_seopress_titles_title":"Enhanced corporate bonds: Where algorithms meet capital market expertise ","_seopress_titles_desc":"Enhanced strategies provide investors with an efficient way to target outperformance without deviating significantly from benchmark risk.","_seopress_robots_index":"","footnotes":""},"categories":[44,115],"tags":[122,91,84,107,86],"class_list":["post-263302","post","type-post","status-publish","format-standard","has-post-thumbnail","category-article","category-artikel-en","tag-active-etf","tag-capital-markets","tag-fixed-income","tag-kapitalmarkt-en","tag-research"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/posts\/263302","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/comments?post=263302"}],"version-history":[{"count":3,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/posts\/263302\/revisions"}],"predecessor-version":[{"id":263352,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/posts\/263302\/revisions\/263352"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/media\/263282"}],"wp:attachment":[{"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/media?parent=263302"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/categories?post=263302"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.quoniam.com\/en\/wp-json\/wp\/v2\/tags?post=263302"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}