Robeco Sustainable Property Equities IE EUR

Folmer Pietersma is Portfolio Manager of the Robeco Sustainable Property Equities fund. Prior to joining Robeco in 2007, Folmer worked at ABN AMRO Asset Management as a Portfolio Manager and Analyst Financials. He started his career at ING in 1997. He holds a Master's in Economics from the University of Tilburg and has a CEFA registration. Frank Onstwedder is Portfolio Manager of the Robeco Sustainable Property Equities fund. He rejoined Robeco in 2018. Prior to that, Frank worked at NN IP in the period 2009-2018 as Head of Financials and Analyst Real Estate in the global equity research team, and as a portfolio manager at Lehman Brothers/Neuberger Berman in the period 2007-2009. In the periods 1994-1998 and 2000-2007 he worked at Robeco in various roles, including Portfolio Manager Robeco Property Fund, between those periods he worked at Aegon Investment Management. He holds a Master's in Econometrics from Erasmus University Rotterdam.

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, ESG and environmental footprint targets, and voting. The fund does not invest in 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 fundamental investment analysis to assess existing and potential ESG risks and opportunities. In the stock selection the fund limits exposure to elevated sustainability risks. The fund also targets a better ESG score and at least 20% lower carbon footprint compared to the reference index. In addition, where a stock issuer is flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to exclusion. Lastly, the fund makes use of shareholder rights and applies proxy voting in accordance with Robeco's proxy voting policy.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 S&P Developed Property Index (Net Return, EUR).

After a strong rally late 2023, the S&P Developed Property Index took a breather in the first half of 2024, but sprung back to life in the second half. As interest rate expectations changed dramatically, while the REITs also reported Q2 earnings which were well received, the sector continued its strong July return in August. Late August, the Fed Chair Powell used his Jackson Hole speech to make his intention to start cutting rates clear: "The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks." These comments can be interpreted as an official start of a new regime where the Fed has the option of monetary easing at its disposal again. With a number of other central banks already cutting interest rates, a long-awaited global easing cycle is set to begin. It is worth noting that historically, the real estate sector starts to rally around 20 weeks before the first Fed rate cut, and continues to perform 20 weeks thereafter.

Based on transaction prices, the fund's return was 3.30%. The sector performed well in August, supported by signs of improving real estate markets, lower interest rates and companies reporting better-than-expected earnings. Most real estate subindustries showed a positive performance, with only Hotel & Resort REITs, Industrial REITs and Telecom Tower REITs down for the month. The best-performing subindustries in August were Self-Storage REITs, Multi-Family Residential REITs and Real Estate Operating Companies. With interest and mortgage rates coming down, Self-Storage REITS performed well as their operating fundamentals are linked to housing mobility. The allocation to the PropTech trend contributed negatively to the relative performance. After a strong July, many of the names within the trend segment gave back some of that performance in August. Stock selection within the Lifestyle and the Sustainable Cities trends added to the underperformance. Within the Sustainable Cities segment, the portfolio holdings Kilroy Realty and BXP lagged as the news flow regarding office fundamentals in the US remains dire.

Commercial real estate fundamentals are decelerating, but from very healthy levels. Labor markets are tight and employment growth is healthy, though decelerating. Historically, employment growth has been a key demand driver of real estate space. The supply of new real estate space is being curtailed, as construction costs increased and financing has dried up. In general, it is easier for a landlord to negotiate rent increases when there is limited new supply and when other goods and services are also going up in price. We still expect to see negative headlines on direct real estate as refinancing difficulties will lead to forced selling, such as in US offices. However, as in previous cycles, the listed real estate market was early in pricing in a correction in the direct market and could also be early in factoring in an end to the downturn. Looking at longer-term periods in history, we find that the sector has generated attractive returns versus general equities. Ownership of property assets offers an attractive income stream and the opportunity to benefit from land value appreciation. Its attractive yield is even more valuable due to the sector's inflation-hedging attributes.