Quant credit is a strategy class that we believe will come increasingly to dominate the credit markets. Quant credit remains a relatively niche investment area compared to quant equity; one data provider1 stated that last year in the US, less than USD150 billion bonds were transacted electronically by quantitative investors.2
The reasons for the lack of progress in the space are numerous, but most come down to the differences in transaction mechanisms for bonds and equities. Bonds are still largely traded over-the-counter, meaning that they are less liquid, that prices are less visible and transaction costs higher than for equities. This is all changing as the electronic trading of fixed income becomes increasingly prevalent.
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