Equities will deliver the best returns over the next five years, with emerging market stocks at the top of the tree, says Lukas Daalder. Read more ...
Factor investing is the talk of the town. But how does it fit into the debate of active versus passive? We interviewed two experts with different perspectives: one working for an index provider while the other represents an active management house.
In some ways, the rise of China has been too good to be true. Its economy has grown with breakneck speed for decades (an average of 9.1% a year since 1994, with a lowest rate of 6%) – if we can believe the official accounts.
‘The future is like a corridor into which we can see only by the light coming from behind.’ This quote sums up how the past and present are used to predict future market returns for investors. Watch our video of Expected Returns, 2015-2019, showing what performance you can expect for the major asset classes in the next five years. See how we believe all the main markets will fare, using our models and some good old-fashioned ingenuity.
How can investors best deal with rapid technological changes in consumer markets*? A resolute approach that actively anticipates trends can bear fruit, as demonstrated at Fondsevent360, a networking gathering for investment professionals.
Corporate bond markets are constantly changing. They continue to present new challenges to us as asset managers and to institutional investors with their obligations to pensioners and policy holders. In this magazine Robeco’s credit team discusses the main market trends, the challenges they pose and, more importantly, how they think we can capitalize on these trends.
What's hot and what's not for the next five years? Our portfolio managers, economists and strategists favor equities over bonds, due to the prospect of higher interest rates, but warn that returns are likely to be lower than during the previous 2014-2018 period.
Central banks have kept rates close to zero and have been the driving force for expected returns. But the economic tide is now turning, with differing effects on stocks, bonds, real estate and other investments.
Robeco bases its returns outlook for the coming five years on expectations for a further gradual recovery in the world economy. The four themes that play a role in this are also important for our alternative scenarios.
To commemorate the start of the Volvo Ocean Race in Alicante on 4 October, we have published an e-magazine focusing on Spain. Find out what our experts think about the Spanish economy and bond market; how captain Bouwe Bekking uses risk management just like Robeco does; and why consumer stocks guru Jack Neele likes Zara.
Following the launch of the Japanese Stewardship Code, an investor delegation from the Asian Corporate Governance Association (ACGA) recently traveled to Japan. Together with representatives from parties such as BlackRock, CalPERS and Norges Bank IM, I observed that observed that Japanese corporate governance is rapidly gaining momentum.
Generic strategies designed to harvest a certain factor premium regularly conflict with other factor premiums. We find that the premiums associated with these strategies tend to shrink, sometimes even to zero, in these periods of factor disagreement. Enhanced factor strategies, on the contrary, are explicitly designed to avoid stocks that are unattractive on other established factors. As a result, we find not only that their added value is higher on average, but also that they continue to deliver when generic factor strategies struggle.
GRESB (Global Real Estate Sustainability Benchmark) is an industry-driven organization committed to assessing the sustainability performance of real estate portfolios globally. Every year GRESB conducts a survey that serves as input for its sustainability benchmark. This dynamic benchmark is used by institutional investors including Robeco to engage with the companies in which they invest with the aim to improve the sustainability performance of the real estate sector.
Alibaba, the largest e-commerce company in China, was listed on the New York Stock Exchange on September 19, 2014. The Robeco Emerging Markets team has been following the company closely over the past half year and participated in the IPO. Now that the dust has settled after the biggest IPO ever, it’s time to look at the strengths and challenges of Alibaba.
More and more investors recognize the importance of ESG integration. However, many parties tend to focus on screening and exclusion. While lots of ESG efforts are being made, the connection to business models and valuation tends to be missing. In this article we discuss how the Robeco Global Equity team tackles the challenge of linking ESG to value drivers.
More than once I have been asked how a sustainable asset-management company can invest in oil firms that pollute the environment and in sports apparel producers whose suppliers violate the rights of their employees. While we are clearly against such practices, it is true that we do not automatically exclude these companies.
Factor Investing is increasingly in the spotlight. Financial magazines run features on it, seminars are organized on the subject, and investors consider adopting its approach. Yet you might wonder: is it just a hype?
Central Bank purchasing is the dominant factor that supports asset prices. Even with the Fed withdrawing, on an aggregate level global central banks still inject more liquidity. The party is not over yet. We stick to long positions for investment grade and have also moved to long beta for high yield after the sell-off this summer. For emerging corporates we are a bit more conservative and keep the beta close to neutral.
The sentiment for Chinese stocks is improving, says Arnout van Rijn, chief investment officer in Hong Kong for Robeco. “Suddenly, that A-Share market becomes part of the global scene and provides good opportunities for investors.” Watch his interview with Rishaad Salamat on Bloomberg Television's ‘On the Move.’
Emerging markets equities can produce handsome rewards for investors – but they carry risks that are not seen in the developed West. Political turmoil and generally more volatile markets require a more cautious approach to capitalize on a fast-growing area for investors.
Factor investing is becoming more popular. Professional investors are increasingly considering investing strategically in certain parts of the financial market which realize better risk-adjusted returns over longer periods. The question is: “How can investors best implement this strategy?”
What are the challenges of smart beta and factor investing? Factor strategies will have a profound impact on the way portfolios are constructed, says James Price, Investment Consultant at Towers Watson.
How can factor investing be implemented? Peter Ferket, CIO Equity discusses the Robeco’s approach: “Enhanced factor premiums significantly improve returns and Sharpe ratios. Optimal portfolio adjustment depends on client preferences and current factor exposures.”
How can factors be useful to implement de-risking programs of pension plans? Alex Neve, Director of equities at Univest talks about the lessons learned. Univest is the investment advisor of all Unilever pension plans.
Where are factor premiums coming from? We try to gain insights on where the return and risk is coming from, says David Blitz, Head of Quantitative Equity Research. “One of our key findings was that factor premiums are not a compensation for risk.”
Investors need to manage credit risk more than ever, and the old ways of assessing a company no longer work. Robeco offers alternative ways to look at corporate bonds without compromising the higher returns they can offer.
The introduction of Apple* Pay in the US will be positive for the transition to electronic payments and credit card companies will benefit, expects Patrick Lemmens, Portfolio Manager Robeco New World Financials Equities.
The banking system is the economy's cardiovascular system. If the arteries become blocked, this can result in a trail of economic destruction. Europe has suffered far more lasting effects from the 2008 crisis than the US. How come?
One of the cornerstones of the investment philosophy of Robeco’s Credit team is that avoiding losers is more important than picking every winner. The team believes that integrating environmental, social and corporate governance (ESG) factors into its analysis strengthens the ability to assess the downside risk of its credit investments. The Credit team is therefore convinced that ESG and credit analysis are a perfect fit.
The guru that dared to predict two years ago that the eurozone would stay intact but the United Kingdom wouldn't, would've been laughed out of town. And yet the secession of Scotland seems to have become a very real possibility.
Value is one of the oldest factors in the world. Graham and Dodd already laid the intellectual foundation in the 1930s for what would later be called value investing and Basu published the first academic study in 1977 documenting the existence of the value premium.
Low-volatility investing is becoming more popular. Many professional investors currently explicitly allocate a significant portion of their portfolio to low-volatility stocks. Robeco uses an enhanced approach to increase returns and reduce risk.
Robeco’s assets under management in Quant Equities recently surpassed the EUR 20bn milestone. On this occasion, we asked Peter Ferket, CIO Equity Rotterdam and closely involved in Robeco Quant Equity since the late 1990s, how he explains the success of quant equity investing and Robeco’s role as a thought leader in this field.
Europe is heading for a Japanese scenario. At least, that is what Japanese institutional investors believe, and so they are buying large quantities of - mainly French - government bonds. But it's not that simple. Just look at what interest rates are doing in the US.
The company Inditex* may not be a well-known name outside Spain, but its flagship brand Zara certainly is. It is famous for selling fashionable clothing. So what are the secrets behind its success and why does Robeco Global Consumer Trends Equities invest in it? Interview with Portfolio Manager Jack Neele.
Eurozone bond yields are now so low they suggest a recession is imminent though the ECB’s dramatic action makes that unlikely, says Robeco’s chief economist.
Institutional investors are becoming increasingly aware of the fact that trends such as population growth, the scarcity of raw materials and globalization have an impact on a company's risks and opportunities. Under the pressure of regulators and investors, such as participants in pension funds, sustainable investing is slowly but surely evolving from a 'niche' to a general trend.
There are many such parallels between sailing around the world and successful investing. Both combine technical know-how with careful risk management. And both require teamwork to win over the long term.
The interest-rate cut and the ECB's other measures introduced on 4 September will have a marginally positive effect on the economy, says chief economist Léon Cornelissen. ECB President Draghi repeated his earlier statement that it is high time governments made a move to strengthen the economy.
Can you have a pioneering spirit and yet still exercise caution? At Robeco we have the strong belief that it is possible to be both pioneering and cautious by applying thorough research and past experience: you need to know what you are doing.
There is a shift towards allocating to the factor premiums momentum, value and low volatility. However, since common factor indexes are a suboptimal way to harvest factor premiums, this paper shows the improved results of a more sophisticated approach. Factor strategies developed by Robeco lead to higher returns, while lowering the risks, resulting in higher Sharpe ratios.
The outbreak of Ebola is a human tragedy in Guinea, Liberia and Sierra Leone. Robeco Afrika has only limited exposure to these countries. In Nigeria, which currently makes up 19.5% of the portfolio, the outbreak seems to be under control. Assuming the virus does not spread within Nigeria, the implications for investors in Robeco Afrika are expected to remain limited.
People are increasingly leading unhealthy lives and running the associated health risks. Food and drinks manufacturers are facing increasing pressure to come up with solutions. Companies that fail to do so, run the risk of having their revenues decline as a result of changing regulations, increased tax burdens, litigation and pressure from the consumer. Companies that deal pro-actively with such issues are more attractive for investors.
Investing in ETFs can be very risky, especially during periods of limited liquidity. Patrick Houweling and Victor Verberk explain why and how active management and the use of derivatives can provide both a solution and an investment opportunity.
The increasing extraction of shale gas in the US will drive changes in the energy mix that will reverberate across the globe, expects Robeco strategist Peter van der Welle. Three statements about shale gas.
Due to start running in October: the fast train between Hong Kong and Shanghai. This is not just any train either - it offers a special rapid connection for investors from Hong Kong enabling them to invest in a wide range of Shanghai-listed stocks (northbound through train). Conversely, Shanghai investors can go to Hong Kong to buy stocks (southbound through train). The official name of this experiment is Shanghai-Hong Kong Stock Connect, but it is popularly known as the 'fast train'. The train already suffered a false start once before, but by all appearances, this time it's serious. What will this mean for you?
Rising wealth in emerging markets is making the companies listed on their stock markets increasingly attractive. Growing disposable incomes from a middle class that adds millions to its ranks every year means higher profits and better returns for investors.
Chinese equities have begun a bull run after years of underperformance, but can it last? Arnout van Rijn, chief investment officer in Hong Kong for Robeco, says the ‘through train’ for full open access to Chinese stocks has left the station and is now on the right track. Watch his interview with Rishaad Salamat on Bloomberg Television's ‘On the Move.’
Korea is a country of hard workers and heavy drinkers. According to the Organisation for Economic Cooperation and Development (OECD), people there work 50% longer hours, and according to the World Health Organization (WHO), 25% more alcohol is consumed there per adult than in the Netherlands. Indeed, there's an interdependency there: no sooner is their long office day over, Koreans start overindulging in the traditional soju (rice wine) over dinner with clients and colleagues, and later drink excessive amounts of whiskey and cognac at a night club.
Long-term interest rates remain low, thanks in part to the central banks. But what if they change their policy? The Bank of England is moving in that direction and might just give us a 'sneak preview' shortly of what interest rates are likely to do in the US.
Low-volatility stocks are in high demand. According to Pim van Vliet, portfolio manager of Conservative Equities, a generic low-volatility strategy is getting more expensive. An enhanced approach is necessary to prevent buying too expensive stocks.
The official results from the Indonesian presidential elections confirmed that Joko Widodo (Jokowi) won with a convincing margin. We consider this a positive development but wait for concrete signs of structural reforms before changing our neutral weight in Indonesia.
Choices relating to asset allocation have major effect on the risk/return characteristics of investment portfolios. New academic insights have led to important innovations in this area. One of these is implementing a market view in a risk-parity portfolio.
Robeco’s quantitative duration model drives the performance of quant duration solutions such as Robeco Lux-o-rente and Robeco Flex-o-rente. We monitor the performance of the model and regularly investigate in which circumstances the model performs well and which conditions are more challenging.
Getting the timing right is essential for any investor trying to follow the simple rule of buying low and selling high to maximize returns. Achieving it can be quite difficult however given the multitude of factors that affect asset prices on a day-to-day basis.
Hedge funds are generally known for their unconstrained, aggressive investment style, their high costs and divergent return profile. But what does this mean in practical terms? What real use are hedge funds in the portfolios of institutional investors such as pension funds?
The market value of companies is increasingly being determined by their intangible assets. Personnel is one important component.
Lasting two hours, it was one of the longest Budget speeches in India’s history. Forty-five days into the job, India’s Finance Minister, Mr Arun Jaitley, presented his maiden Budget proposal, which laid the foundation for the Modi-led government’s development plans. The proposals addressed many economic and social issues while focusing on maintaining fiscal discipline.
The financial materiality of ESG has become much more important as companies and investors realize that sustainability raises profits and returns. But sustainability still needs to become a rational economic choice in itself, and gain wider public acceptance, to tackle the short-termism that still exists, says Responsible Investor’s Hugh Wheelan.
Helena Viñes Fiestas, Head of Sustainable Research (SRI/ESG) at BNP Paribas Investment Partners, explains how the drive to make buildings more sustainable can benefit real estate owners and investors.
The prospect of the first interest rate rises for many years as economic growth improves has led many investors to question their high yield strategies. Deciding what type of fund to be in depends on your outlook.
The development of new cures for severe diseases and the aging of the population have blown up healthcare costs. Fortunately, new tools and technologies promise to enhance productivity and improve healthcare quality.
The ESG ranking of a number of euro periphery countries has improved, after having reached a low in 2010. These changes give information on developments in a country’s investment risk. We use this information to identify trends in, for instance, the political climate that are relevant for our investment decisions.
In May 2014, Narendra Modi was elected the new Prime Minister of India. Will he be able to repeat his strong 12-year economic track record as governor of Gujarat on a national scale? Karnail Sangha traveled to India to gauge the impact of this ‘transformative change in leadership’ and identify the related investment opportunities.
As a result of the finite supply of oil and gas, and the political struggles in many of the producing countries, innovative solutions such as oil sands and shale gas have been gaining ground. Interesting for investors, but at the same time also a possible source of sustainability risk. It is therefore important for investors to enter into a dialogue with oil and gas companies.
Robeco has recently closed an engagement with oil and gas companies on the ESG investment risks related to the exploration of unconventional energy sources, such as oil sands and shale gas. As investors it is important to monitor these risks, as unconventional energy sources could conflict with the need to develop a low-carbon economy, and the companies involved are exposed to reputational risk.
It is June and I have an uneasy feeling about the markets. We are already half way through the year. The season urges me to exercise caution, with profundities such as: ‘Sell in May and go away’, or ‘Investment is a winter sport’.
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Our insatiable hunger for energy has highlighted the need for more energy-efficient solutions. RobecoSAM explains how LED lighting technology can help reduce our energy consumption while massively cutting the street lighting bill of towns and cities. Watch the video.
Over 30 institutional investors joined forces to raise some pertinent issues with the executive board of Hon Hai Precision, also known as Foxconn. “This collaboration is a powerful way of making shareholders’ concerns heard,” says engagement specialist Peter van der Werf. “And it illustrates the growing importance of corporate governance in the Asian region.”
On the road with: After three days full of occasionally incomprehensible jargon and obscure scientific formulas, it finally dawned on me. Most of the companies I observed at my conference on health-care and biotechnology are afflicted with a disease for which a pill will never be the cure: the sickness of complicating matters that are really quite simple.
The development of new cures for severe diseases and the aging of the population have blown up healthcare costs. Fortunately, new tools and technologies promise to enhance productivity and improve healthcare quality. Henk Grootveld, Portfolio Manager of Rolinco and Robeco Global Growth Trends Equities, and Steef Bergakker, Robeco’s Trend Analyst, discuss these exciting new developments and the arising investment opportunities.
Returns on capital exceed the rate of economic growth, concentrating wealth and income among the rich. That is the central assertion of Piketty's book ‘Capital in the Tweny-First Century’. The book's title refers to the social development that capital is the dominant factor of our time once again.
In its outlook for credit markets in the third quarter of 2014, Robeco’s Credit team points out that extremely dovish banks have made investors complacent. The price of money is zero and even negative on a real basis. The search for yield is still on.
The future earning capacity of the workforce varies according to the profession and the individual. In the case of both collective DC schemes and individual life-cycle investment plans, this impacts the investment mix.
In 1999, fifteen years ago, Robeco found that quantitative stock selection techniques known to be effective in developed markets are also able to deliver superior investment results in emerging markets. What are the biggest takeaways from the research done and how does the model work in practice?
After the crisis of 2008, the heads of many pension funds must have been asking them themselves: “Are we investing in the right way?” Factor investing – the strategic top-down allocation of assets to factors such as ‘value’ and ‘momentum’ – has since then moved to the top of the agenda. And Dutch pension funds are leading the pack. But how do they do it and what lessons can other funds learn from them?
The European Central Bank (ECB) should not now need the ‘nuclear option’ of full quantitative easing as growth returns to the Eurozone, though the door remains open for it, says Robeco’s chief economist.
Controversial regimes are countries or regions associated with macro-risks such as poor national and corporate governance systems, systematic human rights violations, or a lack of adequate environmental policy. Robeco has been talking to energy and resources companies on their management of these risks over the last six years. The last engagement is now being closed.
Investors increasingly embrace “smart beta” investing, by which we mean passively following an index in which stock weights are not proportional to their market capitalizations, but based on some alternative weighting scheme. Examples include fundamentally-weighted indices and minimum-volatility indices. In this whitepaper we first take a critical look at the pros and cons of smart beta investing in general. After this we successively discuss the most popular types of smart indices that have been introduced in recent years.
Google’s inexorable rise to knock Apple off its perch as the world’s most valuable brand comes as no surprise to Robeco fund manager Jack Neele. His Global Consumer Trends Equities fund invests in Google but gave up on Apple some time ago.
The Volvo Ocean Race 2014-15 marks the next stage in Robeco’s own voyage to grow our company and promote our brand to a global audience. So we are very proud to be an official sponsor of Team Brunel, the Dutch entry into this awe-inspiring round-the-world challenge.
On the road with: In the week that 72-year old Chairman Lee of the Samsung ‘chaebol’, the largest South Korean conglomerate, was admitted to hospital with serious heart problems, I visited the Samsung Electronics Investors Forum in Hong Kong. Is the conglomerate in good shape for the future?
The European periphery was the clear outperformer in the first quarter of 2014. Kommer van Trigt thinks this will stay a while, because growth is improving and central banks will keep interest rates low.
Throughout the world policymakers are introducing new regulations to combat climate change. This is having a direct effect on the credit quality of companies and even entire sectors. It is therefore essential for corporate bond investors to look at ESG factors.
Investors are looking at emerging markets again after equity values have risen following months of underperformance. Part of the reason is that they have higher growth potential than Western stocks and offer “cheapness all over the place”, says Robeco’s leading specialist on the asset class.
In 2010, the RobecoSAM sustainability scores were integrated in the stock selection model which is the performance driver of Robeco’s Enhanced Indexing strategy. Research shows that his has contributed to the strategy’s strong performance since then.
Behind the expression the Internet of Things lies a whole new world of opportunities. It stands for convenience, increased productivity and many other aspects that can keep analysts in the investment world busy for many years to come.
As a visitor to Japan, amazed by Japanese society, you inevitably think of Bill Murray in the film 'Lost in translation' as you return to your hotel room. And the country's economy never fails to elicit a similar feeling of wonder.
Companies hold the key for improving sustainability practices, says Peter White, Chief Operating Officer of the World Business Council for Sustainable Development (WBCSD). Here he explains how some companies are gearing up to meet some tough challenges, whereas others are falling behind.
The quality of a corporate board is vital to good corporate governance. Robeco recently commissioned a study into board quality and nomination procedures. The conclusions will be used as a starting point for a new engagement program. An important but challenging undertaking, because of the daunting diversity in corporate board structures around the world.
Passive investing has become increasingly popular. Despite its undeniable appeal, there are also some considerations which should make investors think again about the desirability of a passive approach.