Robeco is an international asset manager offering an extensive range of active investments, from equities to bonds. Founded in 1929, Robeco has proved to be a pioneer in quantitative techniques and constant innovation.
Our CMO and co-founder Mr. Guillaume Subias sat down for an exclusive interview with Mr. David Blitz, Head of Quantitative Research at Robeco.
Quantilia [Guillaume Subias]: What is Robeco’s approach when it comes to quantitative investment?
David Blitz: Robeco has a long heritage in quantitative investing. We’ve been leading the way in quantitative investing for over 25 years. With our experienced research and investment teams, systematic exploitation of market inefficiencies and strong track records, we thrive to deliver over the long-term superior investment returns. As well as providing a wide range of funds, we tailor quantitative mandates to meet the needs of institutional investors. In fact, we initially developed several of our quantitative strategies as bespoke solutions to meet an individual client’s needs. We customize portfolios along a number of dimensions, including their investment universe, risk-return profile and ESG characteristics, enabling our clients to fine-tune their portfolios.
Quantilia: Where does Robeco rank in the quant investment business?
David Blitz: In 2010, Robeco used to manage 10 billion EUR of assets, that was right after the crisis. Now we manage over 50 billion EUR. The growth in quantitative strategies has been significant, and we target some ambitious objectives for the next 5 years. We expect quantitative equity strategies to grow further but also expect some substantial growth to come from fixed income quantitative strategies.
Historically, it was complex to create quantitative strategies in fixed income mostly because investors and asset managers were lacking long term data. This has improved a lot over the past few years and we expect a significant growth in the fixed income quant business where we see a lot of potential with products like our Multi-Factor Credit strategy, launched in 2015. Having said that, Robeco’s DNA is still in the equity market, with 40 billion€ invested in quant equity strategies out of 50 billion € in total (as of December 2017).
Quantilia: How do you build quant strategies at Robeco?
David Blitz: At Robeco, we have one mantra: “as simple as possible, as complex as needed”. We manage a comprehensive range of quant strategies. They’re all underpinned by one clear investment philosophy. This philosophy can be summarized as follows:
Evidence-based research: We seek to understand what drives the markets by identifying and understanding factors that are rewarded with superior risk-adjusted performance.
Economic rationale: statistical patterns can occur by chance, so any quantitative indicator we use in our processes must be based on a convincing economic rationale.
Prudent investing: All of the investment decisions we take are transparent and easily explainable, and we always avoid unnecessary trading costs.
Quantilia: You mentioned that it was getting easier to access to the data in the fixed income space. Do you think that new technologies are encouraging this trend?
David Blitz: Long Term simulation requires reliable historical data. Our research and investment teams rely, among other tools and our own proprietary models, on numerous empirical studies published for over 50 years. For equities, we look for quality data of about 8,000 stocks, while for the credit market globally we consider an investment universe of 14,000 securities. For our simulation, we use long term data: We can go back to 1986 for equities and to 1992 for credit. You don’t want to limit yourself to the last 5 to 10 years, we need a full business cycle and a long historical data to be able to manage a strategy.
Quantilia: You have just been onboarded onto Quantilia platform. What made you decide to join it?
David Blitz: The quantitative investment universe is getting bigger and bigger with a large variety of investment products. We believe it is therefore a value-added to have a dedicated and independent platform like Quantilia that will provide information to investors and answer institutions’ needs for state-of -the art technology. Quantilia addresses investor’s needs for data and analysis in their search for competitive quantitative offerings. As a pioneer and leader in quantitative investing, it was therefore important for Robeco to be part of it. This type of data provider 2.0 makes a lot of sense for an ever more demanding business.
Quantilia: If you had 3 pieces of advice to give to an institutional investor today, what would they be?
David Blitz: My first piece of advice would be to think carefully about diversifying the factor exposure, to avoid concentration into one specific factor. Secondly, I would advise investors to not just focus on the return of the investment, but to closely consider the risk return profile of each investment. There are many risk indicators which should be looked at – volatility and maximum drawdown are among them. My last piece of advice would be to look at quantitative fixed income strategies. I really believe the performance will come from the exposure to fixed income factors in the coming few years.
About David Blitz
David Blitz, Head of Quant Research, is responsible for the coordination of all quantitative research. The key quant equity tools which have been developed in this area are our proprietary stock selection models and portfolio-optimization algorithms.
David has published papers in the Journal of Portfolio Management, Journal of Performance Measurement and Journal of Empirical Finance. In addition, he is a guest lecturer at Erasmus University’s Rotterdam School of Management and a regular speaker at international conferences.
He started his career in the investment industry at Robeco in 1995. He holds a PhD in Finance and a Master’s in Econometrics (cum laude) from Erasmus University Rotterdam.
Robeco is a pure play international asset manager founded in 1929. It currently has offices in 15 countries around the world and is headquartered in Rotterdam, the Netherlands. Through its unique integration of fundamental, sustainable and quantitative research, Robeco is able to offer both institutional and private investors an extensive selection of active investment strategies, covering a broad range of asset classes. As at March 31st, 2018, Robeco had EUR 165 billion in assets under management, 70% of which were institutional.
More information is available at www.robeco.com