Key Takeaways
- • Bernd Wuebben, director of systematic investing and quantitative research at AllianceBernstein, said a quantitative investment process could begin competing with the best fixed income and fundamental traditional credit managers in the near future, according to Benefits Canada.
- • Institutional investors typically rely on quantitative and potentially systematic processes to manage about 30 to 40 per cent of equity assets under management, but only an estimated $50 billion to $100 billion of the roughly $140 trillion global bond universe is managed through a fully systematic process.
- • Wuebben expects a quantitative security selection process based on a factor investing model could emerge for fixed income strategies, with the goal of generating repeatable, beta-free active returns uncorrelated to the benchmark.
- • Wuebben cautioned that substantial factor-based research and data work remain necessary, particularly a quantitative view on individual bond spreads.
Summary
Bernd Wuebben, director of systematic investing and quantitative research at AllianceBernstein, told delegates at the Canadian Investment Review's 2025 Investment Innovation Conference that quantitative and systematic processes could soon compete with the best fixed income and fundamental traditional credit asset managers. Speaking in a session at the event, he rejected the notion that such strategies are passive, robotic or simple.
According to Benefits Canada, institutional investors typically rely on quantitative, and potentially systematic, processes to manage about 30 to 40 per cent of equity assets under management. In fixed income, by contrast, estimates cited at the conference show that only between $50 billion and $100 billion of the average $140 trillion global bond universe is managed through a fully systematic process. The gap, in Wuebben's view, represents an opportunity.
Wuebben said he expects a quantitative security selection process based on a factor investing model could emerge for fixed income strategies, allowing managers to "create and engineer return streams that are completely different and very differentiating." His initial objectives include repeatable results and active returns uncorrelated to the equity market. In long-only portfolios that aim to outperform a benchmark, he said he wants active returns to be beta-free and not correlated to the underlying benchmark, and he expressed disinterest in strategies that rise sharply in one year and fall the next.
He emphasized that the approach rests on a substantial quantitative investment process and liquidity tools designed for fixed income markets. He also cautioned that significant factor-based research and data work is still required, including a quantitative view of individual bond spreads. Wuebben favours models that avoid market timing or equity-exposure timing for bond portfolios, stating that investors should expect their bond managers to make selections in the same way they expect equity managers to pick stocks.
According to Benefits Canada, institutional investors typically rely on quantitative, and potentially systematic, processes to manage about 30 to 40 per cent of equity assets under management. In fixed income, by contrast, estimates cited at the conference show that only between $50 billion and $100 billion of the average $140 trillion global bond universe is managed through a fully systematic process. The gap, in Wuebben's view, represents an opportunity.
Wuebben said he expects a quantitative security selection process based on a factor investing model could emerge for fixed income strategies, allowing managers to "create and engineer return streams that are completely different and very differentiating." His initial objectives include repeatable results and active returns uncorrelated to the equity market. In long-only portfolios that aim to outperform a benchmark, he said he wants active returns to be beta-free and not correlated to the underlying benchmark, and he expressed disinterest in strategies that rise sharply in one year and fall the next.
He emphasized that the approach rests on a substantial quantitative investment process and liquidity tools designed for fixed income markets. He also cautioned that significant factor-based research and data work is still required, including a quantitative view of individual bond spreads. Wuebben favours models that avoid market timing or equity-exposure timing for bond portfolios, stating that investors should expect their bond managers to make selections in the same way they expect equity managers to pick stocks.
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