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Based on transaction prices, the fund's return was 0.52%. The European high yield market delivered a total return of 0.7% on the back of some spread tightening. German Bund yields edged higher during the month, impacting returns by roughly 10 bps. The fund had a more or less flat performance versus the index during December. Total returns for the full year were close to 2.5% (gross) and the fund performed in line with the benchmark. Our underweight beta made a small negative contribution (-8 bps) for the month and our issuer selection was a small positive. In December, all sectors in European high yield had a positive total return and performed more or less in line on a risk-adjusted basis. Sector allocation for the month was flat, while rating allocation (up in quality) detracted 6 bps from our relative performance. On an issuer level, our underweight in Casino Guichard detracted around -3 bps. We still dislike the fundamentals of this French supermarket, although supermarkets have undeniably performed well during the pandemic. Winners for the month were small contributions from our overweight in Berry Global (+1 bps), which was upgraded to IG, and UPM (+1 bps).
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The European high yield market traded sideways in December, closing the month 12 bps tighter. Over the course of 2020, we have seen high yield spreads spike to historic highs in March, but in the end, spreads widened only 50 bps for the year. Underlying Bund yields declined around 30 bps for the year. The index generated a total return of around 0.70% in December on the back of ever more expected stimulus and positive vaccine expectations. The massive rebound in flows that we saw in the previous months slowed down towards the end of the year, with December being more or less flat. European high yield supply was extremely heavy in the fourth quarter, notching up the third highest quarterly total ever. BBs continued to dominate supply and were responsible for two-thirds of the overall issuance. New issue supply in 2020 set a new record, with more than EUR 81 billion of gross issuance (fixed coupons), the largest ever for a calendar year. Net issuance for the year equated to almost EUR 50 billion. Despite positive supply dynamics, the asset class recorded net outflows of nearly EUR 4 billion for the year. The average yield to worst of the Global High Yield Index ended the month at 3.04%.
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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.
Fundamentally, we have seen the fastest drop in economic activity in seventy years. Spreads reached very substantial levels and the US high yield default rate reached 8%. Thanks to a well-coordinated series of policy actions by fiscal and monetary authorities, a recovery set in quickly. Most key potentially negative events have been priced out by the markets. From Covid-19 to the US elections and a default cycle, we have had it all in the shortest credit cycle ever. The possible variation in economic and technical outcomes is large. In order for credit markets to keep rallying, we need a flawless situation on the political front, no monetary mistakes, no substantial rate volatility, a further earnings recovery, and certainly no fatigue in fiscal stimulus. In short, simply the best set of pathways justifies current valuations. The year will be either boring or bearish. There is hardly any room for aggressive tightening. At best, we will see some carry, roll down and certain sectors recovering from Covid-19. We still find value in pockets of the market in individual situations. The big beta play is done; it is back to stock selection and being more cautious.
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 | LU0226953981 |
Bloomberg | RGCEHBD LX |
Valoren | 2242471 |
WKN | A0HGD6 |
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1st quotation date | 1128297600000 |
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 0.05% 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.
The fiscal consequences of investing in this fund depend on the investor's personal situation. For private investors in the Netherlands real interest and dividend income or capital gains received on their investments are not relevant for tax purposes. Each year investors pay income tax on the value of their net assets as at 1 January if and inasmuch as such net assets exceed the investor’s tax-free allowance. Any amount invested in the fund forms part of the investor's net assets. Private investors who are resident outside the Netherlands will not be taxed in the Netherlands on their investments in the fund. However, such investors may be taxed in their country of residence on any income from an investment in this fund based on the applicable national fiscal laws. Other fiscal rules apply to legal entities or professional investors. We advise 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 information contained on these pages is for marketing purposes and solely intended for Qualified Investors in accordance with the Swiss Collective Investment Schemes Act of 23 June 2006 (“CISA”) domiciled in Switzerland, Professional Clients in accordance with Annex II of the Markets in Financial Instruments Directive II (“MiFID II”) domiciled in the European Union und European Economic Area with a license to distribute / promote financial instruments in such capacity or herewith requesting respective information on products and services in their capacity as Professional Clients.
The Funds are domiciled in Luxembourg and The Netherlands. ACOLIN Fund Services AG, postal address: Affolternstrasse 56, 8050 Zürich, acts as the Swiss representative of the Fund(s). UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zurich, postal address: Europastrasse 2, P.O. Box, CH-8152 Opfikon, acts as the Swiss paying agent. The prospectus, the Key Investor Information Documents (KIIDs), the articles of association, the annual and semi-annual reports of the Fund(s) may be obtained, on simple request and free of charge, at the office of the Swiss representative ACOLIN Fund Services AG. The prospectuses are also available via the website www.robeco.ch. Some funds about which information is shown on these pages may fall outside the scope of the Swiss Collective Investment Schemes Act of 26 June 2006 (“CISA”) and therefore do not (need to) have a license from or registration with the Swiss Financial Market Supervisory Authority (FINMA).
Some funds about which information is shown on this website may not be available in your domicile country. Please check the registration status in your respective domicile country. To view the RobecoSwitzerland Ltd. products that are registered/available in your country, please go to the respective Fund Selector, which can be found on this website and select your country of domicile.
Neither information nor any opinion expressed on this 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 Switzerland Ltd. product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports.
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