Robeco High Yield Bonds IExH USD

Sander Bus is CIO and Portfolio Manager High Yield Bonds in the Credit team. He has been dedicated to High Yield at Robeco since 1998. Previously, Sander worked for two years as a Fixed Income Analyst at Rabobank where he started his career in the industry in 1996. He holds a Master's in Financial Economics from Erasmus University Rotterdam and he is a CFA® charterholder. Roeland Moraal is Portfolio Manager High Yield in the Credit team. Before assuming this role, he was Portfolio Manager in the Robeco Duration team and worked as an Analyst with the Institute for Research and Investment Services. Roeland started his career in the industry in 1997. He holds a Master's in Applied Mathematics from the University of Twente and a Master’s in Law from Erasmus University Rotterdam. The Robeco High Yield fund is managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts. The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team’s fundamental research. Our analysts have long term experience in their respective sectors which they cover globally. Each analyst covers both investment grade and high yield, providing them an information advantage and benefiting from inefficiencies that traditionally exist between the two segmented markets. Furthermore, the credit team is supported by three dedicated quantitative researchers and four fixed income traders. On average, the members of the credit team have an experience in the asset management industry of seventeen years, of which eight years with Robeco.

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 0.01% 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.

Investors who are not subject to (exempt from) Dutch corporate-income tax (e.g. pension funds) are not taxed on the achieved result. Investors who are subject to Dutch corporate-income tax can be taxed for the result achieved on their investment in the fund. Dutch bodies that are subject to corporate-income tax are obligated to declare interest and dividend income, as well as capital gains in their tax return. Investors residing outside the Netherlands are subject to their respective national tax regime applying to foreign investment funds. We advise individual 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, a minimum allocation to ESG-labeled bonds, and engagement. The fund does not invest in credit 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 security analysis to assess the impact on the issuer's fundamental credit quality. In the credit selection the fund limits exposure to issuers with an elevated sustainability risk profile. Furthermore, the fund invests at least 2% in green, social, sustainable, and/or sustainability-linked bonds. Lastly, where issuers are flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to engagement.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 Bloomberg US Corporate High Yield + Pan Euro HY ex Financials 2.5% Issuer Cap.

In the month of October, high yield spreads widened by 43 basis points, reaching a level of 442 basis points. During this timeframe, the yield-to-worst increased by 53 basis points, finishing at the 9.08% level. During the month, a sharp escalation in geopolitical tensions in the Middle East drove up oil prices and uncertainty, posing additional inflation risks. Elsewhere in markets, the other main story has been the continued resilience of the US economy, with recent data continuing to surprise on the upside for the most part. In a month with no Fed meeting and inflation surprising on the upside (YoY at 3.7%), the yields on the 10-year US rate surged to 5 per cent, a level untouched since 2007. Expectations around the next US central bank meeting are settled for a pause between 5.25% and 5.5%, with the focus shifting towards how long rates will remain elevated. In Europe, the ECB held the rates steady at the 4% level. The US high yield sector printed a moderated total of USD 9.1 billion. Default activity registered the highest number of defaults in three years, with seven defaults and two distressed exchanges, amounting to a value of USD 8.4 billion.

Based on transaction prices, the fund's return was -0.73%. In October, the high yield bond index posted a total return of -1.10%. The negative performance was mainly driven by the negative credit return. The fund outperformed the benchmark by 30 bps. Beta had a positive impact, but issuer selection alone provided 24 bps. On a risk-adjusted scale, bonds of lower quality underperformed their higher-rated counterparts in both currency denominations; thus our high-quality bias paid off, the first sign of decompression within high yield. Our overweight in euro-denominated bonds, however, had a flat impact on performance. From a sector perspective, the underweight in consumer sectors and the overweight in off-benchmark banking added positively. On the opposite side, the overweight in capital goods detracted, where we have an overweight in names like Ardagh. This global packaging company say some weakness in its third-quarter results and bonds dropped, especially in the holding company where we own bonds. Our underweight in CommScope added to performance; after the third-quarter results a financial restructuring seems to be coming closer.

Following two quarters of recession fears, markets have embraced the soft-landing scenario. Several factors, such as high savings, strong employment, and wage growth, have cushioned the impact of the most intense monetary tightening we have seen in years. However, during the quarter, fundamentals in the US started worsening, suggesting a cautious outlook going forward. In Europe, the economic landscape seems to be in a more challenging position than the US. This is because Europe is a more open economy and closely tied to a slowing Chinese economy. Furthermore, the region has seen less fiscal stimulus, and heavily depends on energy imports. Globally, corporate earnings are down. This weakening, coupled with the need for corporations to refinance at much higher rates, will likely push up interest costs and stress the lower-quality bonds in particular. This past quarter, the high yield bond market has seen narrowing yield spreads and compression. We expect this to reverse, whereby the more speculative segments of the bond market might be hit hardest. We stay cautious, with overweights in BBs and financials characterizing the composition of our portfolios, where beta remains below 1.