RobecoSAM Global Green Bonds IH USD

Michiel de Bruin is Head of Global Macro and Portfolio Manager. Prior to joining Robeco in 2018, Michiel was Head of Global Rates and Money Markets at BMO Global Asset Management in London. He held various other positions before that, including Head of Euro Government Bonds. Before he joined BMO in 2003, he was, among others, Head of Fixed Income Trading at Deutsche Bank in Amsterdam. Michiel started his career in the industry in 1986. He holds a post graduate diploma investment analyses from the VU University in Amsterdam and is a Certified EFFAS Analyst (CEFA) charterholder. He holds a Bachelor’s in Applied Sciences from University of Applied Sciences in Amsterdam. Peter Kwaak is Portfolio Manager Investment Grade in the Credit team. Prior to joining Robeco in 2005, he was Portfolio Manager Credits at Aegon Asset Management for three years and at NIB Capital for two years. Peter has been active in the industry since 1998. He holds a Master’s in Economics from Erasmus University Rotterdam and he is a CFA® charterholder.

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’s sustainable investment objective is to invest in green bonds. Green bonds are bonds that are recognized as such by external sources and which proceeds are used to finance or re-finance in part or in full new and/or existing environmentally-friendly projects. The green bond selection is based on external data or an internally developed five-step Green bond framework. The five-step framework states that the issuer's green bond framework must be aligned with market standards related to green bonds such as such as the ICMA Green Bond Principles. Next, the allocation of the investment proceeds must contribute to at least one of the six objectives of the EU Taxonomy nor do any significant harm to the other five. The six objectives of the EU Taxonomy Regulation are climate change mitigation and adaptation, sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection of healthy ecosystems. The third and fourth steps require that the bond issuer reports on the use of proceeds and that the issuance aligns with the wider sustainability strategy of the issuer. The fifth and last step states that the issuer must respect international norms related to conduct such as international labor rights, human rights and the UN Global Compact. In addition, the investment process also takes into account exclusions following Robeco's exclusion policy and integrates financially material ESG factors in the bottom-up issuer analysis to assess the impact on the issuer's fundamentals.

In July, credit spreads tightened, reflecting optimism that the economy has weathered inflation and interest rate shocks without significant recessionary pressures. Risky assets were boosted by softer inflation data in key economies, such as the lowest reported core CPI print in the US since February 2021. Despite evidence that inflation is declining, signs of a robust economy and strong labor market placed selling pressure on underlying government bond yields. Corporate issuance slowed down compared to previous summer months, and the average maturity of new issues is reduced. In response to the economic landscape, the Fed and ECB raised their policy rates by 25 bps. In Asia, the Bank of Japan (BoJ) made a significant policy shift, widening the band for 10-year JGBs, as inflation continued above its target for 14 straight months. In China, the PBoC cut its 7-Day Reverse Repo rate by 10 bps to 1.9%, signaling that Asian policymakers are turning more proactive.

Based on transaction prices, the fund's return was 0.71%. The fund posted a small positive absolute return and outperformed its index. The overweight duration position in front-end rates and the curve steepener position added. In addition, the significant underweight in yen rates added, as yields rose after the BoJ loosened its yield-policy band as we had anticipated. The index credit spread tightened 7 basis points to 0.95%. The overweight beta positioning and issuer selection contributed positively to performance. Companies that contributed positively to performance were the overweights in Vonovia, AIB Group, and Deutsche Bank.

A buy-on-dips (and sell-the-rally) strategy from a conservative basis remains our preferred approach. Rates and recession fears are the key drivers in this cycle. And although 10-year US yields seem close to the cycle peak, volatility and uncertainty remain. Valuations are still around their long-term average, but are tighter than in earlier years, while financial conditions have tightened further. For now, we have taken some chips off the table. With an outlook of either higher rates or a recession, and valuation in no-man's land, markets are between a rock and a hard place. Technicals remain tough for the period to come. For our investment grade credit portfolios, we brought betas back to around 1.1, whereas the betas of our high yield funds moved below 1.