Firms now betting on “systematic credit investing” range from big traditional money managers such as BlackRock to hedge fund titans like Citadel and Man Group. Nonetheless, after a sharp acceleration in electronic corporate bond trading over the past two years, the optimism in some corners of the industry is palpable. “By taking a more systematic approach to risk in fixed income you can outperform even if you’re facing an environment that isn’t as benign as it has been through my entire career.” “We are at the end of a 40-year bond bull market, and we are going to have to navigate a bear market at some point in the future,” says Dwight Scott, global head of Blackstone’s credit investing arm. The need for a new approach to tackle the coming era is one of the reasons why Blackstone swooped in for DCI last December, despite it managing only US$7.5 billion at the time. “There’s been a real rapid evolution in how corporate credit works,” says Donick.Īt the same time, the four-decade slide in interest rates and inflation has stoked a remarkably long and strong rally for fixed income markets, but one that many investors now fret is coming to an end. Some so-called quants are giddy about the opportunities.
The global corporate bond market stands at over US$40 trillion, but is virtually untouched by the computer-powered “quantitative” investment revolution that has reshaped the stock market in recent decades.
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