The pension challenge

Institutional investors today face a familiar dilemma, now amplified by current market realities. Traditional active managers can deliver bursts of alpha, but potentially at the cost of style drift, headline risk, and higher fees. Passive investing, meanwhile, offers low cost and benchmark consistency, yet leaves portfolios exposed to index concentration and vulnerability in periods of geopolitical volatility. For pension funds tasked with delivering steady, long-term value, neither extreme may be fully satisfactory.

That’s where Robeco’s Active Quant strategies come in: a systematic, evidence-driven approach designed to target reliable excess returns while maintaining benchmark awareness and robust risk management.

What is Active Quant?

At its core, Active Quant combines the rigor of data science with the discipline of economics. It seeks to exploit repeatable market patterns – often caused by human behavior like overreaction or herd mentality – through factors such as value, momentum, quality, and analyst revisions.

Unlike pure passive strategies, Active Quant makes many small, deliberate deviations from the benchmark, as the model identifies stocks that are more likely to outperform. And unlike discretionary active management, it does so within a transparent, rules-based framework that avoids emotional decision-making.

At Robeco, Active Quant is not a “black box.” Models are continually refined, tested for robustness, and grounded in economic rationale. Researchers ask hard questions such as ‘Why does this signal work?’ and ‘Will it persist?’ before any new insight is added.

At the same time, portfolio managers remain firmly in the loop. Their role is not to override the model, but to ensure its outputs make sense in real-world conditions, such as during sudden geopolitical shocks. This combination of systematic discipline and human accountability helps reassure clients that the process is both transparent and resilient.

Benefits and features

For pension funds, Active Quant offers three distinct advantages:

  • Risk management. Active Quant portfolios typically hold hundreds of names, diversifying active risk rather than hinging outcomes on a handful of mega-cap bets. Tracking error is managed deliberately, with optimization tools balancing over- and underweights.
  • Diversification. Active Quant tends to behave differently from both passive and fundamental active strategies. Adding it to a portfolio can create additional diversification across cycles.
  • Adaptability and innovation. Next-generation quant signals are incorporated where they add genuine value. This ensures strategies evolve with markets, without chasing fads.

The result is a disciplined, benchmark-aware approach that seeks to capture alpha consistently, not occasionally.

Evidence in practice

Decades of academic and proprietary research show that factors such as value, momentum, and quality have delivered persistent premiums across markets and cycles. Over time, Robeco has developed enhanced versions of these factors that are designed to be more robust, risk-aware, and adaptive to changing markets.

By combining enhanced factors intelligently, Active Quant strategies seek to generate returns that are more stable than those of many discretionary peers. Institutional investors worldwide can opt to use Active Quant both as a core allocation and as a diversifying sleeve alongside fundamental or passive exposures.

Understanding the risks

Like all investments, Active Quant comes with risks. Factor returns can fade or go through periods of underperformance. Concentrated benchmarks – dominated by a few mega-cap stocks – can create challenges if portfolios underweight them. And while systematic strategies avoid emotional pitfalls, they still rely on assumptions that need continuous review.

At Robeco, these risks are managed through rigorous testing, careful portfolio construction, and ongoing dialogue between researchers and portfolio managers. Importantly, we distinguish between rewarded risk (worth bearing for potential excess return) and unrewarded risk (to be minimized).

Implementation: How pension funds use Active Quant

Active Quant is inherently flexible, making it suitable for multiple roles in a pension portfolio:

  • Core building block. Especially in markets where stock selection is difficult or costly, Active Quant provides scalable, transparent exposure with alpha potential.
  • Diversifying allocation. For funds already invested in fundamental strategies, Active Quant adds style diversification and reduces reliance on a single investment philosophy.
  • Stepping stone from passive. For schemes moving beyond low-cost indexing, Active Quant offers a controlled, benchmark-aware way to pursue incremental alpha.

Customization is also a strength. Robeco’s Active Quant strategies can be tailored to specific universes and risk budgets, and can also incorporate sustainability considerations. The transparent, systematic approach of Active Quant makes it easily adaptable to a variety of client objectives.

Conclusion: A reliable bridge for the long term

For clients navigating between the low cost of passive and the promise of active, Active Quant provides a middle path: disciplined, transparent, and designed for consistency. It’s a way to harness evidence, economics, and innovation without sacrificing control.

At Robeco, we’ve been refining quant strategies for over 20 years, blending systematic models with human insight to help institutional clients meet their long-term obligations.

To explore how Active Quant could strengthen your portfolio, read more here or contact your Robeco representative.

Disclaimer 
This material is intended for professional investors only and does not constitute investment advice. Investment involves risks. Past performance is not a guarantee of future results.