- Factor Investing and ESG in the Corporate Bond Market Before and During the COVID-19 Crisis
Factor Investing and ESG in the Corporate Bond Market Before and During the COVID-19 Crisis
Wednesday 18 November 2020
Research / Market
The objective of this paper is to illustrate the factor investing space in corporate bonds before and during the COVID-19 crisis and is the natural extension of our prior analysis on both the new alternative credit factors and the ESG integration in credit. We use monthly credit excess return in the EUR denominated Investment Grade bond universe for regression analysis and factor picking. ESG was making its way to becoming a mainstream factor within the Investment Grade universe and when the COVID-19 stress hit the financial markets, it displayed a “hedge-like” behavior. We had previously identified that better ESG and lower cost of capital were related, however the realization of this feature in a stress environment is worth investors’ attention...
Europe, US and China tomorrow: Will it be possible to avoid geopolitical and economic traps?
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The day after #12 - Changing shares of labour and capital incomes: what implications for investors?
The share of national income that is distributed to labour vs. capital has fallen to historically low levels in several advanced economies, such as the United States and the United Kingdom. We believe the Covid-19 crisis, along with other factors, will trigger a rebalancing in favour of labour over the next two decades. A reversion to the long-term average ratio of labour and capital in the share of income would probably enhance social and political stability, and would better fit with a consumer-driven growth model.