Fixed Income, Meet Quant

Jason Kephart: Using a quantitative process that leverages technology to find attractive investment opportunities is old hat in equities, but it's starting to become more popular in fixed-income. That's why one of the funds on our radar is BlackRock Systematic Multi-Strategy.

This multistrategy alternative fund is managed by Tom Parker, one of a few veteran managers focused on quantitative fixed-income. He’s also the lead manager of BlackRock Fixed-Income Global Alpha, the firm’s largest hedge fund, which is also focused on quantitatively investing in fixed-income markets. This fund uses a similar approach to building a multisector bond portfolio. It combines its fixed-income exposure with a long-short equity strategy. The long-short equity portfolio uses similar metrics to evaluate stocks. The shorts are those with deteriorating credit quality.

The idea is that when markets sell off, companies with more questions around how they're going to pay back their debt will fall harder than those with better credit outlooks. These two complementary strategies form the core of a fund that's worth keeping an eye on.