28 Oct 2021

Implementation of RI in Systematic Strategies

Responsible Investment in systematic strategies have many nuances compared to strategies based on more fundamental research. In this toolbox memo, we take a look at the practical implementation of RI in systematic strategies.

Systematic or quantitative strategies typically use algorithms and models within the investment process. These strategies may rely on electronic trading and tend to invest in relatively more liquid instruments.

Discussion on Responsible Investment (“RI”) within alternative investment strategies has historically been centred on traditional long only equity portfolios. However, systematic portfolios are now also in focus. Some systematic strategies rely heavily on data and can have relatively shorter holding periods. These, and other process differences, mean there may be nuances in systematic strategies when integrating RI into investment decisions or running a dedicated product with stated RI objectives.

This memo acknowledges that there is no single way to view RI within a portfolio and contains many items that asset managers and allocators should discuss.

This memo looks at the following for the different instruments traded within this strategy:

  • Data availability and reliability,
  • Responsible Integration: Including financially material RI related risks in the investment process but not pre-defining an investment universe using RI criteria,
  • Responsible Asset Selection: Dedicated RI approaches including exclusions, inclusions, and impact strategies, and
  • Responsible Asset Ownership: Voting, engagement, and activism.