Read: A day as an investor by Michael van Baren

Michael van Baren has been with PGGM Investments since 2017. His educational background is a BSc in Mathematics and MSc in Econometrics. Michael started at PGGM Investments as a Quant Trainee and has been working as a researcher at our Systematic Equities Strategies (SES) team since September 2017.

Developing systematic strategies

The SES team manages the internal quantitative equity portfolio with around € 15 billion of assets under management (Nov 2021). The strategies underlying the portfolio are rooted in academic and proprietary research. Michael’s work ties into this seamlessly: ‘I am a researcher within the team and together with my colleagues I am responsible for the design and implementation of the systematic strategies within the portfolio. My work involves staying up-to-date with current academic research, conducting quantitative research and, if the outcomes are favourable, translating the findings into the portfolio. The main challenge, and excitement, lies in continuously trying to improve our understanding of what drives stock returns and risks and to apply our knowledge to the benefit of the portfolio. The work is never done.’

Anticipating risk

As one of the most important risks in his asset class, Michael notes the performance of the so-called value strategy. The value strategy, which invests in low-priced stocks, is one of the main quantitative equity strategies and has been underperforming in the past few years. Michael says: ‘Research shows that this is most likely due to ever-increasing valuation multiples of expensive stocks (think Tesla, Amazon). In the short-term, continuing valuation expansions may hurt investment returns for the value strategy. As it is unlikely that the valuations of expensive stocks can keep increasing indefinitely, the long-term prospects for value remain positive.’

Integrating ESG factors

There is (and has been) a clear trend to further incorporate ESG

Environmental, Social and Governance

related considerations into the investment processes. Michael: ‘Given the relatively short history, the impact of so-called ESG factors on equity returns is not always entirely clear. We therefore conduct substantial research on integrating ESG factors, while maintaining the return and risk characteristics of the portfolio.’