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Based on transaction prices, the fund's return was -0.11%. The fund underperformed the index by a small margin on a gross performance basis. Total returns were negative and mainly driven by the widening in credit spreads. Our quality bias made a positive contribution to this month’s results as BBs outperformed both Bs and CCCs on a risk-adjusted basis. Dispersion is still gaining traction in high yield markets as investors are looking for a safe place to allocate their elevated cash levels. The primary market is a nice example. There we see BBs printing at record lows with lower-quality paper struggling to get a deal done. This month’s underperformance was driven by our issuer selection, with Hema being the largest detractor (-15 bps). The bonds of this Dutch retailer dropped off a cliff after negative headlines regarding its sponsor hit the market. Europcar is another bleeder (-2 bps) with third quarter numbers disappointing. Not holding any Casino bonds once again produced the biggest gain for the month (5 bps). Financials also outperformed this month, and therefore we benefited from our off-benchmark positioning in names like Banco de Sabadell and AIB Group.
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European high yield had a slightly negative total return in October as the market was digesting third quarter earnings, a potential trade deal with China and a Fed rate cut. Credit spreads widened slightly but together with a flat movement in underlying bund yields, this resulted in yields being more or less unchanged for the month. The Fed’s statement during its October meeting indicated a bias to remain on hold for the short term. The hurdle has increased for the data to qualify as a ‘material’ disappointment in order to realize further easing policy. Furthermore, sentiment benefited from president Trump announcing that a trade deal with China is close to being signed, sealed and delivered. This was just in time to counterbalance his impeachment process that also started during the month. In Europe, we continue to see a strong technical as QE2 has officially started. The long arm of the central banks is reaching down to the high yield space as the spread differentials between BBBs and BBs are at an all-time low. Supply picked up in Europe as we saw EUR 8.6 bln of high yield supply in European currencies. The European high yield index spread widened 26 bps and is now around 389 bps, with a yield of 3.48%.
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All currency risks are hedged.
Robeco European High Yield Bonds make use of derivatives for hedging purposes as well as for investment purposes. These derivatives are very liquid.
The fund does not distribute dividend. The income earned by the fund is reflected in its share price. The fund's entire result is thus reflected in its share price development.
Our analysis of issuers goes beyond the traditional financial factors and includes the issuers’ performance on ESG factors. We deem it essential for a well-informed investment decision to take into account those ESG factors that have the potential to materially impact the financial performance of the issuer. This perfectly matches the basic need to avoid the losers in credit management, as many credit events in the past can be attributed to issues such as poorly designed governance frameworks, environmental issues, or weak health & safety standards. The aim of ESG integration is to improve the risk/return profile of the investments and does not have an impact goal. ESG analysis is fully integrated in the bottom-up security analysis. We have defined key ESG factors per industry, and for every company we analyze how the firm is positioned versus these key ESG factors, and how this impacts the fundamental credit quality.
Robeco European High Yield Bonds invests in bonds with a sub-investment grade rating, issued by European issuers. The portfolio is broadly diversified across approx. 80 issuers, with a structural bias to the higher rated part in high yield (BB/B). Performance drivers are the top-down beta positioning as well as bottom-up issuer selection. Duration of the portfolio is managed in line with the index and currency exposure is hedged. The fund aims to outperform its index Barclays Pan European High Yield ex Financials 2.5% Issuer Cap. The index excludes high yield financials based on relatively high systematic risk, and applies an issuer cap to avoid concentration risk. The investment philosophy is based on managing a solid diversified portfolio with a long term view. Top-down beta positioning is based on the outcome of our credit quarterly outlook meeting, in which the team is discussing the fundamental market outlook, valuation of bond markets and market technicals. Bottom-up issuer research is executed by our credit analysts, who execute the fundamental analysis. The portfolio managers are responsible for the portfolio construction. A proprietary developed risk management approach avoids high risk concentration in the portfolio. The Robeco European High Yield fund is managed by our credit team which consists of seven portfolio managers and twelve credit analysts. Within the team, Sander Bus and Roeland Moraal are responsible for high yield. Sander has been involved in the fund since inception in 1998, Roeland joined in 2003. The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team's fundamental research.
Risk management is fully embedded in the investment process to ensure that positions always meet predefined guidelines.
We are still convinced that we are approaching the end of the credit cycle. It is difficult to time the precise turn of the market but, given the risks, we continue to advocate a defensive positioning with an underweight in the higher-risk segments of the high yield market. Ominously, more segments of the US yield curve have inverted this year: historically, on five out of six occasions, a recession followed within two years. More optimistically, money supply is increasing and recent corporate bond supply volumes are setting new records. But global fundamental developments suggest more caution: the US economy used to lead the global economy but, since 2015, it now seems the other way around, with China being the driver. Overall, our view is cautious as the cycle is late and valuations are tight. We know it is wise not to fight the Fed or the ECB, but any further strength could be seen as an opportunity to reduce risk. Companies with a high debt burden immediately feel the deceleration in economic growth and we expect their underperformance to continue. We focus on avoiding defaults and we continue to favor high-quality high yield bonds.
Mr. Roeland Moraal, Vice President, CEFA, Portfolio Manager. Roeland is a Senior Portfolio Manager High Yield within Robeco's Credit team since January 2004. Before assuming this role, he was portfolio manager in our Rates team for two years and worked as an analyst with the Institute for Research and Investment Services for three years. Roeland started his career in the investment industry in 1997 at Robeco. He holds a Master's degree in applied mathematics from the University of Twente and a Master's degree in Law from Erasmus University, Rotterdam. Roeland became a CEFA charter holder in 2000 and he is registered with the Dutch Securities Institute. Mr. Bus is Head of the Credit team and manages our high yield portfolios. Prior to joining Robeco in 1998, Mr. Bus worked for Rabobank as a fixed income analyst for two years. Mr. Bus holds a Master's degree in Financial Economics from Erasmus University, Rotterdam. He became a CFA charter holder in 2003 and is registered with the Dutch Securities Institute. Mr. Bus has been active in the industry since 1996.
The Robeco European High Yield fund is managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts. The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team’s fundamental research. Our analysts have long term experience in their respective sectors which they cover globally. Each analyst covers both investment grade and high yield, providing them an information advantage and benefiting from inefficiencies that traditionally exist between the two segmented markets. Furthermore, the credit team is supported by three dedicated quantitative researchers and four fixed income traders. On average, the members of the credit team have an experience in the asset management industry of seventeen years, of which eight years with Robeco.
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ISIN | LU1040800143 |
Bloomberg | REHOIHE LX |
Valoren | 23834271 |
WKN | A14WFK |
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1st quotation date | 1395878400000 |
Close financial year | 31-12 |
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The fund is established in Luxembourg and is subject to the Luxembourg tax laws and regulations. The fund is not liable to pay any corporation, income, dividend or capital gains tax in Luxembourg. The fund is subject to an annual subscription tax ('tax d'abonnement') in Luxembourg, which amounts to 0.01% of the net asset value of the fund. This tax is included in the net asset value of the fund. The fund can in principle use the Luxembourg treaty network to partially recover any withholding tax on its income.
Investors who are not subject to (exempt from) Dutch corporate-income tax (e.g. pension funds) are not taxed on the achieved result. Investors who are subject to Dutch corporate-income tax can be taxed for the result achieved on their investment in the fund. Dutch bodies that are subject to corporate-income tax are obligated to declare interest and dividend income, as well as capital gains in their tax return. Investors residing outside the Netherlands are subject to their respective national tax regime applying to foreign investment funds. We advise individual investors to consult their financial or tax adviser about the tax consequences of an investment in this fund in their specific circumstances before deciding to invest in the fund.
The content displayed on this website is exclusively directed at qualified investors, as defined in the swiss collective investment schemes act of 23 june 2006 ("cisa") and its implementing ordinance, or at “independent asset managers” which meet additional requirements as set out below. Qualified investors are in particular regulated financial intermediaries such as banks, securities dealers, fund management companies and asset managers of collective investment schemes and central banks, regulated insurance companies, public entities and retirement benefits institutions with professional treasury or companies with professional treasury.
The contents, however, are not intended for non-qualified investors. By clicking "I agree" below, you confirm and acknowledge that you act in your capacity as qualified investor pursuant to CISA or as an “independent asset manager” who meets the additional requirements set out hereafter. In the event that you are an "independent asset manager" who meets all the requirements set out in Art. 3 para. 2 let. c) CISA in conjunction with Art. 3 CISO, by clicking "I Agree" below you confirm that you will use the content of this website only for those of your clients which are qualified investors pursuant to CISA.
Representative in Switzerland of the foreign funds registered with the Swiss Financial Market Supervisory Authority ("FINMA") for distribution in or from Switzerland to non-qualified investors is ACOLIN Fund Services AG, Affolternstrasse 56, 8050 Zürich, and the paying agent is UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zürich. Please consult www.finma.ch for a list of FINMA registered funds.
Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco/RobecoSAM AG product should only be made after reading the related legal documents such as management regulations, articles of association, prospectuses, key investor information documents and annual and semi-annual reports, which can be all be obtained free of charge at this website, at the registered seat of the representative in Switzerland, as well as at the Robeco/RobecoSAM AG offices in each country where Robeco has a presence. In respect of the funds distributed in Switzerland, the place of performance and jurisdiction is the registered office of the representative in Switzerland.
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