Robeco Euro Credit Bonds I EUR

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. Jan Willem de Moor is Portfolio Manager Investment Grade in the Credit team. Prior to joining Robeco in 2005, he worked at the Dutch Medical professionals’ pension fund as an Equity Portfolio Manager and at SNS Asset Management as an Equity Portfolio Manager. Jan Willem has been active in the industry since 1994. He holds a Master's in Economics from Tilburg University. The Robeco Euro Credit Bonds fundis managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts (of which four financials 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 dedicated quantitative researchers and 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 5% 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 Euro Aggregate: Corporates.

October was a meagre month for credit markets, with credit spreads widening during the month. The conflict in the Middle East 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. Most companies reported decent quarterly earnings, although many companies reported that economic activity is decelerating. In the US, GDP increased due to healthy consumer spending. Labor markets in the US continue to be strong and employment costs continued to rise. US Treasury yields continued to rise, with the 10-year yield trading briefly above 5% on 23 October. Investors were concerned about policy rates remaining higher for longer, and the US funding gap and debt ceiling discussions. In Europe, macro data was weaker, with Q3 GDP showing a minor contraction. On a positive note, Eurozone inflation data dropped to a two-year low. The ECB decided to keep policy rates on hold. It will continue to reinvest redemptions from the PEPP program.

Based on transaction prices, the fund's return was 0.50%. The underlying portfolio outperformed its benchmark index, gross of fees. The primary driver of the benchmark's return was the decline in underlying government bond yields. Specifically, the 10-year German Bund yield decreased by 3 basis points, and the 5-year German government bond yield, which more closely mirrors the benchmark duration, was 12 basis points lower. In contrast, credit spreads widened, with the Euro aggregate corporate index ending the month 7 basis points higher at 160 basis points above underlying government bonds. Relative performance is attributed to beta positioning and issuer selection, in line with our investment process. Our small beta overweight position had a slightly negative impact during the month, as index spreads widened while we maintained a beta position above one throughout the period. The majority of the excess return came from our significant positive issuer selection contribution, particularly in the banking sector, and from overweight positions in International Flavors & Fragrances, NIBC Bank and Deutsche Bank.

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. China faces similar challenges that resemble Japan's experience after 1990. Hence we are slightly long beta in investment grade and conservatively positioned in high yield. Within investment grade markets we see banks offering the best value. Senior banking paper continues to trade wider than the historical average. European credit spreads are trading wider than their US counterparts. In EM, we continue our cautious stance on the riskiest countries including China.