AQR White Paper
This paper aims to increase familiarity of the credit asset class and provide an overview of our approach to systematic credit investing. We introduce credit instruments and outline a simple framework for understanding sources of credit excess returns. We summarize two avenues for approaching systematic credit investing (and provide many references for readers interested in greater depth): 1) strategic and tactical exposure to the overall credit risk premium and 2) relative value opportunities across credit instruments. We find that both kinds of systematic credit exposure have the potential to provide meaningful performance and diversification benefits to traditional and alternative portfolios.