Robeco Financial Institutions Bonds IB EUR

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. Jan Willem Knoll is Portfolio Manager Investment Grade in the Credit team. He joined the Credit team in 2016. Previously, Jan Willem headed the Financials Equity sell-side research team at ABN AMRO. He started his career in the industry in 1999 at APG, where he held several positions including Portfolio Manager of a global insurance portfolio and subsequently a pan-European financials portfolio. Jan Willem holds a Master’s in Business Economics from the University of Groningen and he is a CFA® charterholder. The Robeco Financial Institutions Bonds fund is 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 Financials Subordinated 2% Issuer Cap.

Risk appetite remained firm in March with credit spreads continuing their tighter grind and continued strength in global equity markets. The new issue market was still fairly strong and we acquired new Tier-2 bonds of Belfius, Unicaja, HSBC, Bankinter and National Bank of Greece. We are becoming a bit more cautious in buying CoCos and we decided not to participate in the new CoCo issues of for instance NN Group and ASR. The positive run of economic data has continued, forcing most commentators to abandon recession calls. At the same time, the market remains convinced that policy rates have peaked in most major economies. There's a growing consensus on US-Europe inflation and rate cut divergence. US inflation is resilient, while Europe shows signs of easing in manufacturing, services, and employment, aligning with projections of diminishing wage pressures ahead. March saw two notable central bank meetings. The first was from the Swiss National Bank as it became the first major central bank to cut rates during its quarterly meeting. The second was the Bank of Japan which decided to increase the policy rate for the first time in 17 years, moving it from -0.1% to 0%.

Based on transaction prices, the fund's return was 1.57%. The positive return was driven by a decline in underlying government bond yields and a decline in credit spreads. The average index spread ended the month at 190 basis points, 10 basis points tighter than at the end of February. The index excess return of subordinated bonds over underlying government bonds was therefore positive, at 0.99%. The performance of the underlying portfolio, measured gross of fees, was just a bit better than that of the index. The beta overweight position contributed positively, as the asset class had a positive excess return over government bonds. Issuer selection detracted from the performance in March. Measured on a risk-adjusted basis, the underweight in real estate hybrids contributed negatively to the relative performance. Aroundtown and Grand City Properties, two names that we do not hold in the portfolio, announced tenders for some of their hybrids, which led to higher prices. Individual positions that contributed most were Deutsche Bank, Commerzbank and Erste Bank. Names that detracted from the performance were Aroundtown, Grand City Properties and Raiffeisen Bank.

The ideal scenario for credit appears to be materializing, characterized by declining inflation and the likely avoidance of a recession. This soft landing scenario presents the most favorable conditions for credit. However, it is important to recognize the possibility of alternative scenarios, as these cannot be ruled out. We concur with the consensus view that there is a high probability of the Fed implementing three rate cuts and the ECB implementing even one more. So, is there still value? We would argue that while spreads are tight, European investment grade and financials still present attractive value relative to other markets. Although financials have tightened considerably in absolute terms, they still appear attractive compared to corporate counterparts on a relative basis. We maintain that the long-term investment thesis for financials remains intact, given the improvements in capital ratios, liquidity and funding since the global financial crisis. Given that spreads have tightened quite a bit in the past months, we have moved up a bit up in quality, for instance by reducing the exposure to CoCos. That said, we still aim to have a beta positioning that is a bit above 1.