Robeco Sustainable Emerging Credits IH CHF

Reinout Schapers is Portfolio Manager Investment Grade in the Credit team. Prior to joining Robeco in 2011, Reinout worked at Aegon Asset Management where he was a Head of European High Yield. Before that, he worked at Rabo Securities as an M&A Associate and at Credit Suisse First Boston as an Analyst Corporate Finance. Reinout has been active in the industry since 2003. He holds a Master's in Architecture from the Delft University of Technology. Christiaan Lever is Portfolio Manager High Yield and Emerging Credits in the Credit team. Before assuming this role in 2016, he was Financial Risk Manager at Robeco, focusing on market risk, counterparty risk and liquidity risk within fixed Income markets. Christiaan has been active in the industry since 2010. He holds a Master's in Quantitative Finance and in Econometrics from Erasmus University Rotterdam. Based in Singapore, Thu Ha Chow is Head of Fixed Income Asia and Portfolio Manager with a focus on Asian credits. Prior to joining Robeco in 2022, she was Portfolio Manager and Asia Strategist at Loomis Sayles & Co and Head of Asian Credit at Aberdeen Asset Management, both in Singapore. Previously Thu Ha worked for 15 years in London where she held senior fixed income positions at Deutsche Asset Management and Threadneedle Asset Management in addition to 3 years in investment banking at Credit Suisse First Boston. She started her career in 1998 after obtaining a Master’s in Economics and Philosophy from London School of Economics. The RobecoSAM Emerging SDG Credits fund is managed within Robeco's credit team, which consists of eight portfolio managers and twelve credit analysts (of which four cover the financial sector). 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 sixteen 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.

Sustainability is incorporated in the investment process by the means of a target universe, exclusions, ESG integration, and a minimum allocation to ESG-labeled bonds. The fund invests in credits issued by companies with a positive, neutral or low negative impact on the SDGs. The exposure to credits issued by companies with a low negative impact is at max 20% and the average SDG score of the fund must be greater than zero. The impact of issuers on the SDGs is determined by applying Robeco's internally developed three-step SDG Framework. The outcome is quantified with a proprietary SDG score methodology, considering both the contribution to the SDGs (positive, neutral or negative) and the extent of this contribution (high, medium or low). In addition, 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. Furthermore, the fund invests at least 5% in green, social, sustainable, and/or sustainability-linked bonds. Lastly, where a credit issuer is flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to exclusion.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 JPM CEMBI Broad Diversified (hedged into CHF).

October was a weak month for credit markets. The CEMBI spread rose 10 bps to 3.38%. During the month, there was a sharp escalation in geopolitical tensions in the Middle East. This conflict that started with the attack carried out by Hamas on Israel on 7 October dominated news headlines. The event raised concerns about a broader conflict and commodities like oil and gold traded higher during the month, 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. The Chinese property sector remains weak, with no light at the end of the tunnel. New home sales remain weak, as consumers are fearful due to the financial distress situation of many developers. Country Garden officially defaulted and will be removed from the index. Supply in the EM corporate primary market remains very low. The lack of issuance by corporates is still supporting EM spreads.

Based on transaction prices, the fund's return was -1.65%. Total return of the index was -1.22% for the month. The fund's performance was in line with the benchmark. This month's beta contribution was slightly negative (-3 bps), as the beta was kept close to one. Issuer selection's contribution was slightly positive, +3 bps. Overweight positions in Tigo, Raiffeisen Bank and Seagate benefited performance. Whereas our overweight position in First Quantum Minerals detracted. Increased tensions and uncertainties regarding the concession rights of the company in Panama caused bonds to drop a few points. Not owning Energean Israel was a contributor, as bonds dropped on the back of the conflict in Gaza.

Consensus views in the market have changed from a high likelihood of a recession to a most likely soft landing; at least in the US. We argue that this is precisely the time to remain cautious. The US economy has been remarkably resilient despite the sharpest hiking cycle in decades. The factors that caused the lag in monetary policy transmission have now largely played out. The European economy has not enjoyed the same fiscal impulse and is not immune to weakness in China, a key trading partner. This comes on top of the geopolitical risk already present with the war in Ukraine. The Chinese economy has shown outright signs of weakness and the level of monetary and fiscal support has been underwhelming. We maintain a risk position around neutral, as we see continued technical support for EM markets due to the lack of issuance. We continue our cautious stance on the risky countries including China and avoid companies we think are vulnerable to economic weakness and a strengthening USD.