APG, one of Europe’s biggest asset managers, is planning to allocate to quantitative strategies for investing in corporate bonds.
Speaking at IPE’s equities conference in London last week, Gerben de Zwart, head of quantitative equities at the €470bn pension investor, said he foresaw the corporate bond markets evolving to resemble the structure in the equity markets over the next five years.
“A part is allocated to passive, a part is allocated to quant strategies and a part is high conviction fundamental investments,” he told delegates. “We want to be one of the leaders on the quant side and we are currently looking at allocating money to quant managers within the corporate bond markets.”
Speaking to IPE, De Zwart said APG wanted to hire one or two external quant credit managers “with the aim to outperform the credit index through quant investing”.
“We target managers who really take responsibility of the performance through a quant approach,” he added, “and who for that reason take quant investing very seriously and spend time and resources on enhancements or continuous enhancements of their investment strategy.”
At the conference, De Zwart noted that the rise of passive investing was also being reflected in the bond markets, albeit with a delay of several years compared with equity markets.
At the same time, as a result of regulation, more trades and trade information were being reported, which could be collected with the help of advanced computers and data storage.
“If you combine that with the academic research that is finding added value in the corporate bond markets for similar quant strategies, my hypothesis is that within five years it could very well be that the structure of the corporate bond markets will be similar to the equity markets,” he said.
APG currently has a 45% allocation to quant strategies as part of its €170bn listed equity portfolio. It is the asset manager for the €405bn Dutch civil service scheme ABP.
De Zwart said the amount APG planned to allocate to quantitative credit strategies was not yet fixed. It wanted it to represent a “serious step”, although in terms of its whole portfolio it would be a “toe in the water”, he added.