Beat the bond benchmarks

Factor-based investing is a widely used approach in equity markets but far less known and used in bond markets. Yet compelling evidence is emerging of the value of applying factor investing to bonds.

The study ‘Factor Investing in the Corporate Bond Market’ by Patrick Houweling and Jeroen van Zundert finds that identifying corporate bond factors and then combining them in multi-factor portfolios may help enhance risk-adjusted returns. This study, by two investment practitioners, should interest not only bond investors, but also all institutional investors seeking to harvest the various premia offered in financial markets.

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