Fixed Income

Looking Under the Hood of Active Credit Managers

Topics - Fixed Income

Read Time - 25 min

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Looking Under the Hood of Active Credit Managers

Extensive research has explored the style exposures of actively managed equity funds. We conduct an exhaustive set of returns- and holdings-based analyses to understand actively managed credit funds. We find that credit long/short managers tend to have high passive exposure to the credit risk premium. In contrast, we find that high-yield-focused long-only managers provide less exposure to the credit risk premium than their respective benchmarks. For both credit hedge funds and long-only credit mutual funds, we find that neither have economically meaningful exposures to well-compensated systematic factors; there is the potential for a powerful diversifier to be added to a typical credit allocation.

 

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The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees. This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. Past performance is not a guarantee of future results.

 

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Diversification does not eliminate the risk of experiencing investment loss.

 

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