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Brian Chappatta

Quants Claim It’s Their Time to Shine in the Bond Market

“Smart beta” and factor investing are slowly expanding beyond stocks and into fixed income.

The machines want to outshine the fund managers.

The machines want to outshine the fund managers.

Photographer: Keystone/Hulton Archive/Getty Images

The quants are coming for the bond kings.

In recent years, quantitative finance has reshaped equity-market investing, with trend-following strategies and risk-parity funds becoming such a force that they’re often seen as responsible for violent swings in stocks. Fixed income, on the other hand, has largely resisted the idea of using technology and models to automate bond buying, instead favoring the traditional model of leaving it to fund managers to decide how to beat their benchmarks.