How multi-factor risk premia offers value in a corporate bond strategy - the 2020 Covid-19 crisis case study

We aim to explore the practical application of a multi-factor risk premium strategy within a corporate bond framework. We argue it can offer a path towards effective and consistent identification of bonds that can be implemented into a portfolio of bonds with a robust and improving credit quality at an attractive price. In short, factor investing can lead to better risk adjusted returns. Factor risk model screening of corporate bonds is only the first of many elements in a fundamental issuer research since the selection of bonds into an investment portfolio requires careful attention to e.g. diversification and lack of liquidity. Especially during a crisis such as the 2020 Covid-19 V-shaped market chock.