Robeco Sustainable Asian Bonds Bx USD

Based in Singapore, Thu Ha Chow is Head of Fixed Income Asia and Portfolio Manager with a focus on Asian credits. Prior to joining Robeco in 2022, she was Portfolio Manager and Asia Strategist at Loomis Sayles & Co and Head of Asian Credit at Aberdeen Asset Management, both in Singapore. Previously Thu Ha worked for 15 years in London where she held senior fixed income positions at Deutsche Asset Management and Threadneedle Asset Management in addition to 3 years in investment banking at Credit Suisse First Boston. She started her career in 1998 after obtaining a Master’s in Economics and Philosophy from London School of Economics. Reinout Schapers is Portfolio Manager 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.

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 invests in credits issued by companies with a positive, neutral or low negative impact on the SDGs. The exposure to credits issued by companies with a low negative impact is at max 20% and the average SDG score of the fund must be greater than zero. The impact of issuers on the SDGs is determined by applying Robeco's internally developed three-step SDG Framework. The outcome is quantified with a proprietary SDG score methodology, 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. Financially material ESG factors are integrated in the bottom-up security analysis to assess the impact 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.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].

Asian Credit's return was -0.92%, driven by widening credit spreads and higher treasury yields. In China, macro data continues to show weakness. In late August, authorities announced nationwide measures to support the property sector by lower downpayments for first and second homes. The Chinese central bank continues with piecemeal easing, including another policy rate cut and liquidity injections into the banking system. Given the current environment of disappointing growth, the Chinese property market remains under pressure. Property developer Country Garden used the grace period for its USD bond coupon payments, which further increased pressure on the sector. In early August, Fitch downgraded the US credit rating from AAA to AA+. At the annual Fed conference in Jackson Hole, Governor Powell hinted that the Fed is ready to hike interest rates further if the macro data would signal that more tightening is needed to bring inflation back to target. Meanwhile, 10-year US Treasury yields rose around 15 basis points in August, while 2-year yields remain stable. This resulted in a bear steepening of the yield curve.

Based on transaction prices, the fund's return was -0.97%. The total return of the index on the month was -0.92% and that of the fund was -0.86%, outperforming the index by 6 bps. Within country selection, active overweights in South Korea, Hong Kong and India added to performance. Within sectors, the underweights in sovereigns and agencies contributed negatively to the fund's performance, particularly as distressed issuers such as Sri Lanka and Pakistan's discussions with the IMF seem to be turning a corner. The overweights to financials, communications and utilities added to performance.

Despite the US economy being in better shape than the European one, rates and recession fears are driving the current cycle for both economies. Rates volatility remains high, with US Treasury yields close to the cycle peak. In this scenario we prefer a buy-on-dips (and sell-the-rally) approach. Without significant stimulus, the Chinese economy will continue to struggle to recover post-Covid-19. This makes the outlook for many commodities less attractive. While valuations of Asian credit are still around the long-term average, they have tightened from levels seen late last year. Currently, we have taken some chips off the table by reducing the portfolio beta to around neutral. As we wrote in our June Credit Quarterly Outlook, markets are stuck between a stubborn inflation environment and a looming recession. Central banks in developed markets may have to force a slowdown in order to combat inflation. As a result, technicals for the upcoming period will remain tough due to liquidity being withdrawn from the market. The unclear outlook for China adds to the overall uncertainty.