Investment Product and Service Launches

MSCI launches next generation of equity factor models, while Robeco launches quant credit strategy focused on SDGs and climate.

By DJ Shaw

MSCI Launches Next Generation of Equity Factor Models

MSCI Inc. has announced the launch of the next generation of the MSCI Equity Factor Models. The models feature three new factors designed to help investors better understand what drives portfolio risk and performance as market conditions change.

The first new factor, “Sustainability,” integrates an environmental, social and governance sub-factor alongside a carbon efficiency sub-factor that measures a company’s emissions relative to its size. The second, “Crowding,” uses multiple measures to assess how a stock is priced relative to its own history. Finally, “Machine Learning” leverages data science and natural language processing to evaluate the relationships between different variables that affect a stock’s returns.

According to MSCI, the latest models allow institutional investors to construct portfolios across new and familiar factor dimensions, and to run comparisons to industry peers and benchmarks. The models also enhance the transparency of portfolio characteristics through improved handling of IPOs, improved coverage and dynamic industry exposure analysis.

The new models include the MSCI Global Equity Factor Model and the MSCI USA Equity Factor Model, which are designed for long-term investors. The MSCI Global Equity Factor Trading Model and the MSCI USA Equity Factor Trading Model are for investors managing strategies with shorter investment horizons. The new models will be available through multiple distribution channels, including Snowflake’s Data Cloud and select third-party partners, and from MSCI directly via the proprietary Barra Portfolio Manager and BarraOne platforms.

The new MSCI Equity Factor Models also evaluate pre-merger special purpose acquisition corporations, expanding the investment opportunity set for investors as well as improving the calculation of some existing factors. 

Robeco Launches Quant Credit Strategy Focused on SDGs and Climate

Robeco has launched Global SDG & Climate Multi-Factor Credits, its first quantitative fixed-income strategy focused on climate and the United Nations Sustainable Development Goals.

While the strategy’s performance is driven by Robeco’s multi-factor credit selection model, which has been applied to client portfolios since 2012, it has sustainability as its primary objective. Committing to carbon footprint reduction, the strategy is measured against the Solactive Paris-Aligned Global Corporate Index.

The portfolio’s average carbon emissions are kept below the Paris-aligned credit benchmark, which has 50% lower carbon emissions than the mainstream credit benchmark and decarbonizes by 7% each year.

Applying Robeco’s proprietary SDG framework, the strategy invests in companies that have a measurable positive contribution to the SDGs. The strategy also incorporates other sustainability dimensions like reducing ESG risk, water use and waste generation, and excludes companies that do not meet the required standard of sustainability.

In addition to its sustainable investment objective, the strategy pursues the provision of long-term capital growth. Global SDG & Climate Multi-Factor Credits aims to outperform the Solactive Paris-Aligned Global Corporate Index by 50 basis points over a full economic cycle.

Robeco’s quant fixed-income team, co-headed by Patrick Houweling, manages the strategy.