Robeco Financial Institutions Bonds M2H USD

Credit spreads continued to tighten in July, mainly driven by the dovish stance of central banks and the continued search for yield in a world of ever more negative yields. On the very last day of the month, the Fed delivered the first 25 bps rate cut in more than a decade. This rate cut had already been signaled in the weeks before the FOMC meeting and some market participants were hoping for an even higher cut of 50 bps. President Trump is still the biggest advocate for more and bigger cuts. In Europe, the ECB also announced a dovish message at the July press conference, hinting at an upcoming rate cut, a restart of QE and deposit tiering. The latter instrument is meant to help Northern European banks, having excess deposits that are currently yielding -0.40% at the ECB.The fundamental macro environment has not improved in the last month. Brexit risk is rising again, after new UK Prime Minister Boris Johnson hinted at a hard Brexit. Especially in the last week of the month, bond spreads of UK banks started to widen again. The spread between Italian and German government bonds tightened 55 basis points until the middle of July, but widened 15 basis points in the last two weeks.

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.