Multifactor Corporate Bond Strategy
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Putting Credit Factor Investing into Practice
Hendrik Kaufmann; Philip Messow
- ?Quoniam Asset Management GmbH
- ?Robeco Quantitative Investments
Strategy in a nutshell
Universe: USD IG bonds (Financials, Utilities, Industrials) from ICE G0BC index, excluding government and securitized bonds. Compute size, quality, value, momentum, and carry factors monthly. Average ranks across factors → multifactor signal. Long top quintile, equally weighted, monthly rebalanced.
Economic rationale
Functionality comes from diversified, low-correlated factors, capturing complementary sources of return. Each factor (except quality) contributes to outperformance, while low correlation ensures diversification benefits.
Backtest performance
Annualised return2.8%
Volatility1.87%
Sharpe ratio1.5
Maximum drawdown-6.4%