Looking under the Hood of Active Credit Managers

35 Pages Posted: 21 Jun 2019

See all articles by Diogo Palhares

Diogo Palhares

AQR Capital Management, LLC

Scott A. Richardson

AQR Capital Management, LLC; London Business School

Date Written: June 1, 2019

Abstract

Extensive research has explored the style exposures of actively managed equity funds. We conduct an exhaustive set of returns- and holdings-based analyses to understand actively managed credit funds. We find that credit long/short managers tend to have high passive exposure to the credit risk premium. In contrast, we find that high-yield-focused long-only managers provide less exposure to the credit risk premium than their respective benchmarks. For both credit hedge funds and long-only credit mutual funds, we find that neither have economically meaningful exposures to well-compensated systematic factors; there is the potential for a powerful diversifier to be added to a typical credit allocation.

Keywords: corporate bonds, fixed income mutual funds, fixed income hedge funds

JEL Classification: G12; G14; M41

Suggested Citation

Palhares, Diogo and Richardson, Scott Anthony, Looking under the Hood of Active Credit Managers (June 1, 2019). Available at SSRN: https://ssrn.com/abstract=3405316 or http://dx.doi.org/10.2139/ssrn.3405316

Diogo Palhares

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Scott Anthony Richardson (Contact Author)

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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