Jeroen Hagens, a client portfolio manager in the quant team at Robeco, starts by highlighting that the basics of what they do as quant investors has been in place for a long time. It’s about finding reasonably valued, profitable companies that are in a strong market trend.
“These are the core building blocks of our model. However, with the increase in available data there are additional signals that we can use. Over time we’ve been able to build signals into the models by using AI, machine learning and NLP – all the buzzwords – and these more shorter-term signals play a bit more into the market dynamics,” he says.
He adds however that it’s still important to understand the economic rationale behind what they see in the data.
“Our quant department originated from our fundamental team, so that should tell you something of the philosophy behind our strategy. It’s not that we just torture data sets and then see what comes out. It’s about starting with an idea and then using the data to systematically apply that,” he says.
Asked if the process starts with an existing index and then tweaking the holdings based on the signals they get from the model, Jeroen Hagens says that they have different approaches.
“I would say our flagship approach is benchmark aware – starting with the benchmark and then over- and underweighting holdings compared to that. How much you deviate from the benchmark of course depends on the risk appetite of the investor. Separate to that approach we also have a low-risk franchise, which is benchmark agnostic and focuses on bottom-up portfolio construction,” he says.
He adds that one of the big advantages with quant investing is the ability to make tailor-made mandates for investors.
“Customization is central to what we are able to provide. Many investors are still asking for some kind of sustainable implementation, which could be client-specific exclusions or carbon reduction. That’s easy to implement because with quant portfolios you have very well-diversified portfolios with a lot of holdings, so you can tweak these metrics. We also have extensive tooling to analyse those customization requests, and I must say that’s one of the favourite questions clients can ask of us,” he says.
One of the questions that tend to come up in discussion with clients relates to data quality and Jeroen Hagens says it’s up to par if you compare it to developed markets.
“I would even say that there are some data sources available in EM that are not even available in developed markets,” he says.
When it comes to building the portfolios, Jeroen Hagens says that there’s continuous work done on the models, but that they are careful to introduce new signals until they are fully proven.
“For the full history of our strategy, we always said that country risk is a real risk in emerging markets, so we want to limit that risk and stay close to the benchmark. That said, another potential angle would be for our models to also say something about the attractiveness of a country or sector. For instance, if you look at Korea today, there’s a lot of momentum and these stocks are going like crazy. The same can be said for India that was expensive a couple of years ago, and now it’s coming down a bit, but momentum is poor at the moment. These insights could potentially be implemented in the models,” he explains.
Asked if this research is based on factors that they are already implementing – or rather new signals, Jeroen Hagens says it’s both.
“The established models can do a bit, but we’re also looking at alternative datasets so it would be a combination,” he says.
At the core, the process is to keep country and sector risks limited, while creating alpha through stock selection.
“It’s really bottom-up stock selection that we capitalize on. Investing in emerging markets is all about risk management – staying away from those big blow ups. If you are incorrect in selecting a country, then you can have a big impact on your portfolio, hence we keep those risks low,” he says and adds that this is one of the ‘hidden’ strengths of the quant approach and one that’s not focused on enough.
“Emerging markets is often perceived as being very volatile, so risk management and having things under control – not losing money – is very important. You can get it wrong in so many ways and if you avoid that you’re already a winner. This is where a systematic strategy shines, because it’s about risk management, risk management, risk management – and then we add some return drivers to produce a stable outperformance pattern. A stable track record is valuable, but it can be difficult for investors to appreciate that when they see headlines highlighting the performance of Korea in 2025,” he says.
Asked if their quant strategy sometimes is perceived as a black box, Jeroen Hagens says that it of course happens – even if it’s wrong. “Having a transparent portfolio is very important to us. I know every position in the portfolio and why it’s in there. I can explain how the models work. It’s not a black box. I’d rather refer to it as a glass box,” he says.
