Robeco Financial Institutions Bonds IH BRL

Markets experienced a hectic month, as sentiment changed drastically after the third week of the month. News from China about the coronavirus was more or less ignored by markets for the bigger part of the month, but this changed as it became clear that contagion had reached Italy and other European countries. In the same week it became clear that the economic impact of the Chinese measure to contain the virus was large. The Chinese manufacturing PMI dropped to the lowest point in decades. Global equity markets tumbled and credit spreads widened in the last week of the month. Part of the negative impact of this spread widening was offset by a decline in underlying government bond yields. The 10-year bund yield dropped by 18 basis points to -0.61% at the end of the month, getting close to the low levels that were last seen in the summer of last year. As said, market sentiment was still strong in the first weeks of the month. Several new bonds were issued, amongst which AT1 CoCos of Intesa and UniCredit. Both bonds sold off in the last week of the month, as they were issued with relatively low reset spreads and because Italy was the country most impacted by the virus.

All currency risks are hedged.

Robeco Financial Institutions Bonds fund make use of derivatives for hedging purposes as well as for investment purposes. These derivatives are very liquid.

This share class of the fund does not distribute dividend.

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 Financial Institutions Bonds mainly invests in subordinated euro-denominated bonds issued by financial institutions. The fund offers a diversified exposure across 50-60 issuers, including the new style hybrid bonds that are being issued on the back of Basel III regulation. Focus of the fund are higher rated bonds (investment grade) with a tilt to Tier 2 bonds. The fund aims to outperform its index Barclays Euro-Aggregate: Corporates Financials Subordinated 2% Issuer Cap. The index 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. As the investment process is well-structured and proven over time, it contributes to repeatable performance delivery. Duration of the portfolio is managed in line with the index and currency exposure is hedged.

Risk management is fully embedded in the investment process to ensure that positions always meet predefined guidelines.