RobecoSAM SDG High Yield Bonds IEH GBP

High yield bonds extended the December rally into the first two weeks of January. The strong technical support which has fueled the market suddenly stopped when investors started to react to the impact of the coronavirus outbreak. Equity volatility picked up, credit spreads widened and the safe heaven government bond yields tightened pretty ferociously. 10-year US Treasury yields came down to 1.51% from 1.92% at year-end. Within the US high yield market, the sectors which underperformed most were independent E&P (-3.5%) and oil field services (-1.8%) as crude oil prices fell to the lowest level in over a year. In Europe, we witnessed weakness in lodging (-1.1%) and chemicals (-1%). New issue supply surged, primary market activity totaled USD 38.5 billion in the US, one of the busiest months on record. The same elevated activity was visible in Europe, where EUR 13.2 billion of supply hit the market. Companies try to take advantage of the still favorable financing conditions, as new-issuance coupons in Europe came down to 2.20%, compared to 3.67% in 2019. The global high yield index spread widened as much as 53 bps for the month to a level of 389 bps, with an average yield of 5.09%.

All currency risks are hedged.

RobecoSAM SDG High Yield Bonds make use of derivatives for hedging purposes as well as for investment purposes. These derivatives are liquid.

In principle, the fund will distribute dividend annually.

In this fund we look for investments with a positive societal impact, whilst generating healthy financial returns. We define impact as an alignment with the UN Sustainable Development Goals (SDGs). We identify and evaluate the impact that specific credits have on the SDGs, and score all the issuers under coverage of the analysts’ team. These scores categorize credits as having either a Positive, Neutral, or Negative impact on the SDGs. The scores are then used in a screening process, to define the investable universe that exclude credits with a Negative impact on the SDGs. In addition to the universe screening, our credit analysts integrate ESG factors in their analysis of the company’s fundamental credit quality to strengthen our ability to assess the downside risk of our credit investments. Engagement and RobecoSAM's exclusion policy are also form part of the ESG integration policy.

RobecoSAM SDG High Yield Bonds invests in a diversified portfolio of global corporate bonds with a sub-investment grade rating, with a structural bias to the higher rated part in high yield. The selection of these bonds is based on fundamental analysis. The fund applies a screening process, using RobecoSAM’s SDG framework, to select issuers that contribute to realizing the UN Sustainable Development Goals (SDGs). The fund excludes companies that contribute negatively to these goals. RobecoSAM’s SDG framework scores companies based on the magnitude and quality of their contributions to the SDGs through their products, services and operations. Engagement, ESG integration and RobecoSAM's exclusion policy also form part of the investment policy. The fund aims to outperform the Bloomberg Barclays Global High Yield Corporate Index over a full credit cycle. The investment process is based on a top-down analysis of credit markets, combined with thorough bottom-up issuer selection. The investment philosophy is based on contribution to the SDGs but also deliver attractive financial returns for our investors. RobecoSAM SDG High Yield Bonds is managed within our credit team which consists of ten portfolio managers and twenty-two credit analysts. Within the team, Sander Bus, Roeland Moraal and Christiaan Lever are responsible for high yield. Sander has been involved in the mainstream 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. The duration of the portfolio is managed in line with the index and currency exposure is hedged. A proprietary in-house developed risk management approach avoids high risk concentration in the portfolio. Holdings in equities can only appear in the portfolio as a result of corporate actions and/or debt restructuring. It is not the intention of the portfolio manager to use options or swaptions. As the investment process is well-structured and proven over time, it contributes to repeatable performance delivery.

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