Robeco High Yield Bonds Feeder Fund - zero duration I 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 that are relevant 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 [Index name].

In August, the high yield market's spreads widened by 7 basis points, reaching 382 basis points. The yield-to-worst wrapped up the month 12 basis points higher at 8.15%. US jobs growth data was weaker than forecasted in July, and was revised lower for the previous two months, marking the first sign of cooling after 18 months of interest rate rises. However, with the unemployment rate still hovering around the lows, coupled with a growth in wages and a 0.2% rise in core inflation, Fed Chairman Powell maintained a hawkish tone at Jackson Hole. Moreover, corporate earnings depicted a robust economy, highlighting strong business results. In Europe, inflation remained at much higher levels than the ECB targets, despite some early signs of cooling of the economy. August produced its usual subdued primary bond issuance, recording USD 9.3 billion in the US high-yield sector. There was a small rise in default activities, with five companies defaulting and another six engaging in distressed exchanges, cumulatively valued at USD 6.1 billion.

Based on transaction prices, the fund's return was 0.32%. In August, the high yield bond index saw a modest positive total return of 0.19%. Excess return came out at 15 basis points, driven by the carry on high yield. The fund underperformed the benchmark by 35 bps. While the beta influence was negligible, the main cause for this lag was spread decompression. Lower-rated bonds outperformed in risk-adjusted terms, with BB-rated bonds being the month's laggards in both the euro and dollar denominations. Our quality bias negatively impacted our relative performance. As the US market outperformed Europe, we also lost on our overweight in Europe. On a sector level, our underweight in the communications sector negatively impacted results, as some of the distressed names rebounded somewhat in an illiquid and uneventful month. Examples here are Dish and Altice, companies we do not have exposure to. On a ticker level, we benefited from the overweight in water treatment company Olympus Water.

Markets have been talking about the upcoming US recession for more than a year. Over the past few quarters, we have elaborated about the increased risks of a recession, too. As of yet, a recession has not arrived. In Europe, Germany did recently slip into a technical recession after we witnessed two consecutive quarters of negative GDP growth. Markets are stuck between a stubborn inflation environment and a pending recession. These are interconnected. To kill the inflation monster, central banks almost have to force the economy into a recession to cool off labor markets. The time-lags between central bank action and impact make it virtually impossible to avoid overshooting or undershooting. Risks lie in those parts of the market that are vulnerable to these much higher rates, like over-indebted LBOs or certain debt-laden sectors. Luckily we have not seen a capex cycle that has created over-supply situations. Yet, we think accidents are likely to happen, and have seen some already. Stock picking is ever more important, as the current environment will certainly create winners and losers. For now, the beta remains below one.