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Decline

08-04-2025 · Insight

The nature of innovation: Incremental, intentional, and always evolving

Innovation is often portrayed as disruptive, dramatic, or instantaneous. In practice, it tends to be measured, adaptive, and deeply embedded in the everyday work of problem-solving. Especially in data-driven industries like asset management, meaningful innovation arises not from isolated breakthroughs, but from a constant balancing act: exploring new techniques while safeguarding proven processes. This kind of innovation is rarely flashy – but it is vital.

    Authors

  • Jeroen Hagens - Client Portfolio Manager

    Jeroen Hagens

    Client Portfolio Manager

  • Wouter Tilgenkamp - Portfolio Manager

    Wouter Tilgenkamp

    Portfolio Manager

Innovation as quiet evolution

If you have a 20-year-old car, and over time, you’ve replaced several parts – the windows, air conditioning, steering wheel – is it still the same car? Wouter Tilgenkamp, Portfolio Manager, would argue it is. Over the last 20 years, Robeco’s approach has improved: factor definitions have been enhanced and new alpha signals introduced, while portfolio construction algorithms have been revamped – but the soul remains.

In some ways, innovation originates in the freedom to pursue goals with the sense things can be done better. Having a mix of stable, experienced team members and fresh perspectives from new hires or university graduates anchors that perspective.

New ideas are also explored in a controlled environment: Robeco’s incubator, where the team tests concepts with Robeco’s own money. Only when an idea has been analyzed, examined and proved mature is it implemented broadly.

Why communication matters

Communication and partnership are also key when it comes to innovation. It’s vital for asset managers to clearly articulate how and why their strategies are evolving, so that clients can follow that reasoning. Innovative elements need to be repeatable, explainable, and address genuine challenges.

Indeed, while clients understand traditional factors, the world has changed dramatically in the last decade. Staying ahead increasingly requires the integration of AI and related technologies into core operations. The addition of new signals is best seen as evolution, not revolution.

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Signals to watch for: Green flags and red flags

What are green flags and red flags when it comes to innovation in quant? Jeroen Hagens, Client Portfolio Manager, shares that a key green flag is the ease and competence with which quant teams handle new research techniques.
For example, existing strategies can be augmented with next-gen quant signals, including variables that combine alpha generation and sustainability elements, while machine learning approaches are being explored for stock selection. These techniques are good at identifying alpha opportunities while also managing risk.

Alternative datasets, says Hagens, also provide researchers and portfolio managers with a pool from which to fish unique insights. One recent variable Robeco derived uses NLP to translate earnings call audio into sentiment analysis. Another is a job momentum signal, which gauges a company’s health by tracking job vacancies and layoffs.

Red flags, on the other hand, include incorrect or unreliable data and overuse. Research teams are offered new datasets by vendors constantly, and each must be scrutinized to ensure the data isn’t from questionable sources or altered after the fact. Even reliable machine learning methods can be overused. In the end, it’s about getting the delicate balance right between new techniques and established foundations.

“We’ve seen exponential growth in data and computational power, and it’s hard to predict where we’ll be in five years,” says Hagens. “It’s exciting but also a bit daunting because the future is so open.”

Conclusion

Innovation doesn’t always look like a breakthrough – it often looks like refinement. In industries that prize precision and reliability, real progress is steady, explainable, and grounded in both data and discipline. Staying ahead doesn’t mean chasing every trend, but building the capacity to adapt – and to know when not to.

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

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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.