Looking under the Hood of Active Credit Managers

Extensive research has explored the style exposures of actively managed equity funds. We conducted an exhaustive set of return-based and holdings-based analyses to understand actively managed credit funds. We found that credit long–short managers tend to have high passive exposure to the credit risk premium. In contrast, we found that long-only managers that focus on high-yield credits provide less exposure to the credit risk premium than do their respective benchmarks. For both credit hedge funds and long-only credit mutual funds, we found that neither has economically meaningful exposures to well-compensated systematic factors.Disclosure: The views and opinions expressed here are those of the authors and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates, or its employees. This information does not constitute an offer or solicitation of an offer, or any advice or recommendation, by AQR, to purchase any securities or other financial instruments and may not be construed as such. Editor’s Note: Submitted 21 June 2019Accepted 11 December 2019 by Stephen J. BrownWe thank Editor Stephen Brown, Co-Editor Daniel Giamouridis, Antti Ilmanen, Ronen Israel, Oktay Kurbanov, Thom Maloney, Toby Moskowitz, Connor Stack, Dan Villalon, and two anonymous referees for helpful comments and thank Wenry Lu for excellent data analysis for this project.