AI, alternative data and sustainability in focus

As artificial intelligence (AI) and alternative data reshape quantitative investing, Robeco has noted key insights from discussions with institutional investors, consultants and the wholesale market during its recent Australian roadshow.

On the evolution of quantitative strategies, we note the growing role of AI in investment decision-making. Robeco's Next Generation framework integrates AI and alternative data sources, enabling us to refine our strategies and enhance alpha generation. These advancements are now a fundamental part of how we approach investing.

Quant strategies expanding across investor segments

Beyond institutional investors, quantitative approaches are increasingly appealing to wholesale clients. Enhanced Indexing has traditionally been a staple for large institutions, but we're now seeing strong demand from wholesale investors looking for a cost-effective alternative to passive strategies.

Meanwhile, discussions with consultants signalled a shift in sentiment towards emerging markets (EM). Institutional investors used to favour fundamental managers for EM exposure, but now there's a clear recognition that quantitative strategies can be highly effective in this space. The systematic and data-driven nature of quant allows us to navigate the extensive EM universe efficiently, capturing alpha opportunities by exploiting inefficiencies while managing risk.

Addressing ESG in a shifting political landscape 

Unsurprisingly, sustainability was a major topic of discussion, particularly in light of political uncertainties, such as a potential second Trump presidency. We received many questions on how this might impact ESG investing. The reality is that ESG preferences vary by region, but for our US clients, we haven't observed major shifts. While some large asset managers have withdrawn from net zero commitments, our stance remains unchanged. Sustainability remains deeply integrated into our strategies.

One of the biggest debates is how to incorporate real-economy emissions in portfolio decarbonisation strategies. It's clear that reducing financed emissions alone isn't enough; linking it to real-world impact is critical.

A notable development in this space is Robeco's Climate Traffic Light tool, designed to assess the credibility of corporate GHG reduction targets. By integrating forecasted decarbonisation pathways into portfolio construction, we can align portfolio-level decarbonisation with actual real-world emission reductions. This approach enhances transparency and ensures that our investment decisions drive meaningful environmental progress.

Looking ahead

The visit emphasised the growing sophistication of Australian investors in both quantitative investing and sustainable finance. The level of engagement and insight from local investors was impressive. Australia is at the forefront of key global investment themes, from AI-driven strategies to climate-conscious investing.