Robeco Financial Institutions Bonds IH BRL

November was a very eventful month that started with the US elections. The result of the elections is that the US will inaugurate a new president in January, but whether economic and fiscal policy will change dramatically remains to be seen. The announcement by Pfizer that its vaccine is more successful than expected, had a much bigger impact on capital markets. Sentiment clearly changed into risk-on, with strong performance of equity and corporate bond markets. Subordinated debt of banks and insurance companies rallied too in this environment. BBVA announced the sale of its US business for USD 11.6 billion, which will lead to a significant improvement in the bank's capital ratio. A few days later, the bank announced a takeover bid for the smaller Spanish bank Sabadell. Bonds of BBVA and Sabadell rallied after these two events. In the end the bid for Sabadell failed, which led to a reversal of part of the earlier gains for Sabadell's bonds. Brexit headlines did not have much impact on the development of spreads in November. Spreads of for instance Irish banks underperformed in the first two weeks of the month, but outperformed in the second half.

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.