Factor investing – the systematic search for alpha returns using well-documented properties of an asset class – is often associated with equities, but can work equally well in fixed income, BNP Paribas Asset Management experts argue in our webcast on Factors and Fixed Income.
In credit investing, they have identified robust factors that can be used to score and rank corporate bonds across regions and over time.
The factors used are:
- Value – scoring bonds on the carry (return) per unit of risk as well as the spreads offered
- Quality – scoring bonds on the issuer’s financial ratios and balance sheet data (e.g., cash flow)
- Momentum – scoring bonds on their market dynamics over the medium term
- Low risk – scoring bonds on their volatility
All the factors are used to build a portfolio that is designed to offer investors a stable and sustained performance over the medium term . Their combined use should improve diversification as it helps to avoid issuer concentration.
As with all BNP Paribas Asset Management funds, the investment approach used involves the integration of environmental, social and governance (ESG) selection criteria. On the basis of the UN Global Compact and BNP Paribas sector policies, not ESG-suitable issuers are excluded in combination with an explicit objective for the portfolio to achieve a higher ESG score than that of the benchmark .
Watch the webcast to find out:
- what factor investing can offer investors
- more about the key metrics involved in this style of investing
- more about our expertise and track record in factor investing
- why BNP Paribas Asset Management’s approach of integrating ESG criteria benefits investors.
 The value of investments may fluctuate. Past performance is no guarantee of future returns.
 See, for example, this non-financial report. These guidelines are mentioned for your information only and are subject to change. Prospectus guidelines and the KIID are leading.
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Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.