RobecoSAM SDG Credit Income CH GBP

Victor Verberk is CIO Fixed Income and Sustainability and Portfolio Manager Investment Grade Credits. Prior to joining Robeco in 2008, Victor was CIO at Holland Capital Management. Before that, he was Head of Fixed Income at MN Services and Portfolio Manager Credits at AXA Investment Managers. He has been active in the industry since 1997. Victor holds a Master’s in Business Economics from Erasmus University Rotterdam and he is a Certified European Financial Analyst. Reinout Schapers is Co-Head Portfolio Management 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. Evert Giesen is Portfolio Manager Investment Grade in the Credit team. Previously, he was an Analyst in Robeco’s Credit team, responsible for covering the Automotive sector. Prior to joining Robeco in 2001, Evert worked at AEGON Asset Management for four years as a Fixed Income Portfolio Manager. He has been active in the industry since 1997 and holds a Master's in Econometrics from Tilburg University.

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 0.05% 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.

The fiscal consequences of investing in this fund depend on the investor's personal situation. For private investors in the Netherlands real interest and dividend income or capital gains received on their investments are not relevant for tax purposes. Each year investors pay income tax on the value of their net assets as at 1 January if and inasmuch as such net assets exceed the investor’s tax-free allowance. Any amount invested in the fund forms part of the investor's net assets. Private investors who are resident outside the Netherlands will not be taxed in the Netherlands on their investments in the fund. However, such investors may be taxed in their country of residence on any income from an investment in this fund based on the applicable national fiscal laws. Other fiscal rules apply to legal entities or professional investors. We advise 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 solely invests in credits issued by companies with a positive or neutral impact on the SDGs. The impact of issuers on the SDGs is determined by applying Robeco's internally developed three-step SDG Framework. The outcome is a quantified contribution expressed as an SDG score, 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. ESG factors are integrated in the bottom-up security analysis to assess the impact of financially material ESG risk 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.

After the strong total returns in January, credit markets gave up most of these in February. Most volatility was in treasury markets, with 5-year treasury yields rising 56 bps to 4.18%. Credit markets traded relatively sideways, with the Global High Yield Index declining 3 bps to 4.95% and spreads on the Bloomberg Global Aggregate-Corporates Index rising 2 bps to 1.35%. In emerging markets, the CEMBI spread was unchanged at 3.29%. In February, inflation fears made a comeback. This was triggered by a strong US job market report and unemployment declining to 3.4%. On top of that, CPI numbers were higher than expected and retail sales numbers surprised on the upside. Markets started to expect more tightening from the Fed and US Treasury yields rose over February. In Europe, inflation continues to surprise on the upside. With the economy continuing to do fine, reported corporate earnings were decent over the fourth quarter. The banking sector benefits from higher net interest margins. Only in some sectors like technology hardware, companies are reporting weaker results due to an inventory correction in the market.

Based on transaction prices, the fund's return was -2.51%. The fund had negative total returns over February, mainly driven by the negative contribution from rising treasury yields. Credit returns made a small positive contribution to performance in February. On a name basis, there were strong positive contributions from IHO Verwaltungs GmbH and Adani Green Energy within corporates. Holdings in the financial sector like AXA, Fidelidade and Banco Comercial Português also made positive contributions. Negative contributors were Cellnex, Raiffeisen Bank and Canpack. The fund's duration exposure made a negative contribution to total returns, as treasury yields rose substantially in February.

A hiking cycle often ends in a recession with rates typically peaking before credit spreads do. We believe we are in the valley between the two peaks. Credit spreads have also rallied a lot since mid-October, but are set to re-widen when markets start anticipating a recession that would hit corporate health. Markets are starting to price out recession risk, which seems odd given the economic data points. We are more careful on cyclical names in corporate high yield, as these companies would be more vulnerable in a recession, which is not reflected in current valuations. Also, valuations in some emerging markets have become expensive. Although European financials have recently rallied, they still look attractively priced.