Robeco Sustainable Property Equities M USD

Folmer Pietersma is Portfolio Manager of the Robeco Sustainable Property Equities fund and member of the Sustainable Global Equities team. Prior to joining Robeco in 2007, Folmer worked at ABN AMRO Asset Management as a Portfolio Manager and Analyst Financials. He started his career at ING in 1997. He holds a Master's in Economics from the University of Tilburg and has a CEFA registration. Frank Onstwedder is Portfolio Manager of the Robeco Sustainable Property Equities fund and member of the Sustainable Global Equities team. He rejoined Robeco in 2018. Prior to that, Frank worked at NN IP in the period 2009-2018 as Head of Financials and Analyst Real Estate in the global equity research team, and as a portfolio manager at Lehman Brothers/Neuberger Berman in the period 2007-2009. In the periods 1994-1998 and 2000-2007 he worked at Robeco in various roles, including Portfolio Manager Robeco Property Fund, between those periods he worked at Aegon Investment Management. He holds a Master's in Econometrics from Erasmus University Rotterdam.

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 fund incorporates sustainability in the investment process via exclusions, ESG integration, ESG and environmental footprint targets, and voting. The fund does not invest in issuers that are in breach of international norms or where activities have been deemed detrimental to society following Robeco's exclusion policy. Financially material ESG factors are integrated in the bottom-up fundamental investment analysis to assess existing and potential ESG risks and opportunities. In the stock selection the fund limits exposure to elevated sustainability risks. The fund also targets a better ESG score and at least 20% lower carbon, water and waste footprints compared to the reference index. In addition, where a stock issuer is flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to exclusion. Lastly, the fund makes use of shareholder rights and applies proxy voting in accordance with Robeco's proxy voting policy.The following sections display the ESG-metrics for this fund along with short descriptions. For more information please visit the sustainability-related disclosures.The index used for all sustainability visuals is based on S&P Developed Property Index (Net Return, USD).

After a strong end to 2023, the real estate sector took a breather in the first two months of 2024. Economic data points in the US, in particular employment growth, came in stronger than expected. Interest rates, especially on the shorter end, reacted strongly, with the US 2-year Treasury yield jumping from 4.21% to 4.63% by the end of February. Spreads remained stable, with US BBB spreads steady at 135 basis points. While the financing environment for (real estate) companies remains a headwind from an earnings perspective, absolute and marginal financing costs have improved materially since late October. Since the start of the bear market in real estate stocks in September 2021, November 2023 was the third time that the sector started to rally on interest rate and inflation expectations. This time the rally continued in December and despite the move up in global bond yields in 2024 year-to-date, the sector's performance has remained resilient since then. Will the third time be the charm? As in previous cycles, the listed real estate market was early in pricing in a correction in the direct market and could also be early in factoring in an end to the downturn.

Based on transaction prices, the fund's return was 0.35%. February was an interesting month with many reversals versus January. Top-down intervention by Chinese policymakers resulted in a reversal of January's losses in that market and also pushed Hong Kong real estate stocks higher. The higher bond yields put performance pressure on Europe, where many of its highly leveraged stocks performed badly in February, while US real estate stocks went up as their sensitivity to rate moves is lower than Europe's. From a subindustry perspective, data center REITs showed the strongest performance again in February. Data center REITs performed well as strong fundamentals get reflected in higher rents. The outperformance in February was driven by stock selection within the PropTech and Sustainable Cities trends. Within PropTech, the performance of Equinix, Goodman Group, CBRE and LOG Commercial were the main drivers. Equinix and Goodman Group both benefit from positive trends in the data center industry, while reporting strong earnings as well. Within Sustainable Cities, Mitsubishi Estate continued to perform well, while Hong Kong-based holdings Swire Properties and Sun Hung Kai Properties recovered strongly on the back of Chinese policy interventions.

Commercial real estate fundamentals are decelerating, but from very healthy levels. Labor markets are tight and employment growth is strong, though decelerating. Historically, employment growth has been a key demand driver of real estate space. The supply of new real estate space is being curtailed, as construction costs increased and financing has dried up. Developed economies are expected to remain in an inflationary environment. In general, it is easier for a landlord to negotiate rent increases when other goods and services are also going up in price. While fundamentals remain supportive for property stocks, financing costs have risen sharply. As the listed real estate sector has repriced trading below NAV, declining property values have already been priced in. Looking at longer-term periods in history, we find that the sector has generated attractive returns versus general equities. Ownership of property assets offers an attractive income stream and the opportunity to benefit from land value appreciation. Its attractive yield is even more valuable due to the sector's inflation-hedging attributes.