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How smart is your credit beta?

A look at fixed income “smart beta” ETFs


Christoph Schon
Head of Applied Research, EMEA, SimCorp 

Develop true factor-based quantitative fixed income strategies

Even though fixed income quants and researchers have been talking and writing about factor-based credit investing for many years, we are still a long way from having a set of universally recognized factor definitions, the likes of which have been available for equities for many decades.  

The main reason for this is the lack of good-quality data to perform the same cross-sectional regression techniques that are used in equity risk modeling. The Axioma Credit Spread Factor Model, with its foundation of robust issuer curves, is the first commercially available credit risk model that has been able to successfully apply these techniques to extract meaningful, significant signals and discernible risk premia from credit spreads. 

With this report, you will:  

  • Receive an analysis of three different “smart beta” ETF funds under the High Beta High Yield, Low Beta and Multi-Factor umbrellas.  
  • Learn why it’s a misconception that securities with a higher spread or yield will automatically exhibit a higher beta to the overall market.
  • Understand the methodology behind the Axioma Credit Spread Factor Model, which allows for more accurate and meaningful decision-making.

Axioma solutions are a part of the SimCorp One integrated front-to-back investment management platform, offering seamless integration and enhanced capabilities for your investment strategies. 

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