Robeco logo

Disclaimer

Please read this important information before proceeding further. It contains legal and regulatory notices relevant to the information contained on this website.

The information contained in the Website is NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws. The value of the investments may fluctuate. Past performance is no guarantee of future results. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency.

In the UK, Robeco Institutional Asset Management B.V. (“ROBECO”) only markets its funds to institutional clients and professional investors. Private investors seeking information about ROBECO should visit our corporate website www.robeco.com or contact their financial adviser. ROBECO will not be liable for any damages or losses suffered by private investors accessing these areas.

In the UK, ROBECO Funds has marketing approval for the funds listed on this website, all of which are UCITS funds. ROBECO is authorized by the AFM and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.

Many of the protections provided by the United Kingdom regulatory framework may not apply to investments in ROBECO Funds, including access to the Financial Services Compensation Scheme and the Financial Ombudsman Service. No representation, warranty or undertaking is given as to the accuracy or completeness of the information on this website.

If you are not an institutional client or professional investor you should therefore not proceed. By proceeding please note that we will be treating you as a professional client for regulatory purposes and you agree to be bound by our terms and conditions.

If you do not accept these terms and conditions, as well as the terms of use of the website, please do not continue to use or access any pages on this website.

Decline

05-02-2024 · Interview

Customizing quant with Quintet

In an investment world increasingly focused on sustainability, investors face the complex task of aligning their portfolios with sustainable practices and evolving regulations. Each investor’s journey is distinct, often presenting challenges in identifying an appropriate starting point or pathway. In response, Robeco leverages its sustainable investing IP and strong quantitative research capabilities to meet clients at the current stage in their sustainability journey. A prime example of this approach is our collaboration with Quintet, aimed at increasing the level of sustainability while maintaining a robust client portfolio.

In our discussion with Paul Linssen, Head of Fund Solutions at Quintet and Robin van der Poel, Robeco’s Deputy Head of Sales, we explored Quintet’s desire to enhance sustainability without trading in returns. This conversation shed light on the journey for a bespoke solution and how Robeco, using our Customizer tool, effectively met Quintet’s specific needs. 

    Authors

  • Robin van der Poel - Executive Director, Head of Wholesale Netherlands

    Robin van der Poel

    Executive Director, Head of Wholesale Netherlands

  • Anna Heldring - Investment writer

    Anna Heldring

    Investment writer

  • Lusanele Magwa - Investment Specialist

    Lusanele Magwa

    Investment Specialist

What unique challenges was Quintet looking to address at the start of this journey?

Paul Linssen: “This first came up around Covid, when we started discussing developments within Quintet. I indicated to Robin that we were trying to make our portfolio more robust, while maintaining the sustainable profile. We had discovered that the instruments we used had a relatively high correlation. So we were looking for something that would diversify compared to the methodology we already had in place, in this case the MSCI World SRI index. And we preferred an instrument that ideally had a lower tracking error compared to the parent benchmark, because we measure performance against traditional benchmarks. So those were the two main challenges we faced, and that’s when the conversation kicked off.”

paul-linssen-4000px.jpg

What aspects of collaborating with Robeco to develop a customized solution were the most significant for you? What elements were you especially drawn to?

Paul: “The starting point for us is to feel comfortable with the skills and in-house expertise. Having an established relationship with Robeco, we knew that your quant side was strong. We’ve used several of your solutions over the years, so when we asked for a lower tracking error portfolio, we were confident we’d get a robust one. Your strong track record in sustainability combined with the quant elements, especially around in the light of SFDR discussions, was another compelling argument in favor of Robeco in supporting such products.

Practicalities also play a big role, like the flexibility to create share classes across Quintet’s locations. We’ve got a lot of different locations with diverse needs, and the more flexible your partner, the easier it is to gain acceptance across different countries. This flexibility from your end has been a significant advantage.

The comparative discussions regarding your proposed solution and the indices, and the evaluation of added value and overall portfolio effect was also helpful. And the work around the SDGs was especially appealing to the sustainability team because it was a different setup and one that we could easily follow in terms of how to build the portfolio.”

The dedicated marketing support during the launch was crucial, too. Given that quantitative strategies differ from fundamental ones, detailing what the product entails is important. Your support was excellent, adding to its widespread acceptance. One last thing to mention is the softer but equally important values: our open dialogue, mutual trust, responsiveness, reliability, and a long-term focus.

Active Quant: finding alpha with confidence

Blending data-driven insights, risk control and quant expertise to pursue reliable returns.

Find out more

Robin, could you please take us through the journey so far from your perspective? In terms of your collaboration with Paul and Quintet and the process behind the scenes?

Robin van der Poel: “As a client, Paul didn’t witness our extensive behind-the-scenes work. Mutual trust, as Paul said, is essential, and our personal relationship played a role in co-creating this solution. I appreciated the openness from both sides, and for our part we opened up our quant research. Jan de Koning, our Head of Quant Client Portfolio Management closely collaborating with the client. The request was complex, involving balancing the risks of the SRI indices with a product offering similar sustainability but lower tracking error. We said yes, we can do that, but then had to backtest and show how it worked.

Initially, there was significant exploration into the structure and the right level of tracking error to reduce the overall tracking error in Quintet’s US portfolio. Our collaboration with Paul and team was marked by frequent discussions to refine the product to meet their specific needs. For example, in our SDG discussions, we debated whether to exclude only the -2 and -3 scoring companies, or also the -1s in terms of the SFDR.

robin-van-der-poel-4000px.jpg

The process, lasting about six to eight weeks, was dynamic. Our quant team’s flexibility was highly appreciated. We constantly made adjustments, potentially laying the groundwork for the Quant Customizer we now use. This tool enables real-time discussions with clients to adjust tracking error or sustainability characteristics. At that time, however, it was still a concept and not integrated into the tool.

In terms of marketing support, Jan and I in particular held four webinars for the investment teams across Europe. This also supported the perception of the products within Quintet. With the SRI indices lagging behind the regular ones, there were question marks around sustainability. Robeco promised and delivered US exposure with a lower tracking error and a high level of sustainability and even outperformed the benchmark. It’s a good example of the quant team translating client desires into a solution they want.”

Get the latest insights

Subscribe to our newsletter for investment updates and expert analysis.

Don’t miss out

Can you elaborate more on the solutions we’re developing with clients in general?

Robin: “We see a lot of interest in customizing portfolios based on client preferences, which are pretty nuanced, maybe on a regional basis or in terms of the desired outcomes. This is where we can use our customizer tool to assess what sustainability considerations they want to take into account, if they have specific return targets, and what flexibility they have in terms of risk budgets. So if it doesn't fit cleanly into a pooled vehicle, we can customize the solution for them on a mandate basis. That's where we are seeing activity. Given that we use a quant platform capable of trading off sustainability, risk, and returns, that flexibility is quite appealing to clients.

And we increasingly see clients coming to us with the passive question, wanting a higher level of sustainability because standard indices are not that flexible, and often not that sustainable. Or, if they are, they come with an elevated tracking error, echoing Quintet’s experience with the SRI indices. In this example, when a choice is made to overweight US assets while using the SRI index, you often see underperformance due to its strict exclusions and constraints. This means if you’re bullish on the US and expect high returns, going the SI route might lead to lower returns than expected. It’s a significant shift from what you’d normally anticipate, and it can be tricky to explain why there’s a drop in performance. This is hugely mitigated with this solution because we tick a lot of boxes. By combining everything in one algorithm, we deviate much less.”

Paul: “Another factor is that we have a pan-European footprint. We noticed that the leeway people accept in terms of underperformance linked to sustainability, for example in 2022, was higher in the Netherlands than perhaps some other countries. This customized solution really caters to both sides of that debate, striking the right balance.”

Robeco

Robeco aims to enable its clients to achieve their financial and sustainability goals by providing superior investment returns and solutions.

Important information This disclaimer applies to any documents and the verbal or written comments of any person in presentations or webinars on this website and taken together is referred to herein as the “Information”. The services to which the Information relate are NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws and must not be relied or acted upon by any other persons. This Information does not constitute an offer to sell, or a solicitation of an offer to buy, any financial product, and may not be relied upon in connection with the purchase or sale of any financial product. You are cautioned against using this Information as the basis for making a decision to purchase any financial product. To the extent that you rely on the Information in connection with any investment decision, you do so at your own risk. The Information does not purport to be complete on any topic addressed. The Information may contain data or analysis prepared by third parties and no representation or warranty about the accuracy of such data or analysis is provided.
In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management UK Limited (“RIAM UK”) is authorised and regulated by the Financial Conduct Authority. RIAM UK, 30 Fenchurch Street, Part Level 8, London EC3M 3BD (FCA Reference No:1007814). The company is registered in England and Wales under Ref No. 15362605.

In all cases where historical performance is presented, please note that past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. Robeco Institutional Asset Management B.V. (“Robeco”) expressly prohibits any redistribution of the Information without the prior written consent of Robeco. The Information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use is contrary to law, rule or regulation. Certain information contained in the Information includes calculations or figures that have been prepared internally and have not been audited or verified by a third party. Use of different methods for preparing, calculating or presenting information may lead to different results. Robeco Institutional Asset Management B.V. is authorised as a manager of UCITS and AIFs by the Netherlands Authority for the Financial Markets and subject to limited regulation in the UK by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.