RobecoSAM QI Global SDG & Climate Multi-Factor Credits ZH GBP

Patrick Houweling is Co-Head of Quant Fixed Income and Lead Portfolio Manager of Robeco’s quantitative credit strategies. Patrick has published seminal articles on Duration Times Spread, factor investing in credit markets, corporate bond liquidity and credit default swaps in various academic journals, including the Journal of Banking and Finance, the Journal of Empirical Finance and the Financial Analysts Journal. The article 'Factor Investing in the Corporate Bond Market' he co-authored received a Graham and Dodd Scroll Award of Excellence for 2017. Patrick is a guest lecturer at several universities. Prior to joining Robeco in 2003, he was Researcher in the Risk Management department at Rabobank International where he started his career in 1998. He holds a PhD in Finance and a Master's (cum laude) in Financial Econometrics from Erasmus University Rotterdam. Mark Whirdy is Portfolio Manager Quant Fixed Income. His areas of expertise include portfolio optimization, credit markets, credit derivatives modelling and quant investment process development. Prior to joining Robeco, Mark was Portfolio Manager in the Quant Credit team at Pioneer Investments and Analyst in the Quantitative Equities team at that firm. He is a graduate from University College Dublin, and holds a Master’s in Business from University of Ulster. Johan Duyvesteyn is Portfolio Manager Quant Fixed Income. His areas of expertise include government bond market timing, credit beta market timing, country sustainability and emerging-market debt. He has published in the Financial Analysts Journal, the Journal of Empirical Finance, the Journal of Banking and Finance, and the Journal of Fixed Income. Johan started his career in the industry in 1999 at Robeco. He holds a PhD in Finance, a Master's in Financial Econometrics from Erasmus University Rotterdam and he is a CFA® charterholder.

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’s sustainable investment objective is to advance the United Nation's Sustainable Development Goals and contribute to keeping global temperature rise well-below 2°C by reducing the carbon footprint of the fund. SDG, climate change and sustainability considerations are incorporated in the investment process via exclusions, ESG integration, ESG and environmental footprint targets. Firstly, the fund does not invest in credits that are in breach of international norms or where activities have been deemed detrimental to society following Robeco's exclusion policy. This includes activity-based exclusions of Article 12 of the EU regulation on Climate Transition Benchmarks, EU Paris-aligned Benchmarks and sustainability-related disclosures for benchmarks. In addition, the fund excludes credits issued by companies that have a negative impact on the SDGs. The impact of issuers on the SDGs is determined by applying Robeco's internally developed three-step SDG Framework. Secondly, financially material ESG factors are integrated in the portfolio construction to ensure the ESG score of the portfolio is equal or better than that of the reference index. By restricting the GHG emissions the carbon footprint of the fund is made lower than that of the Paris-Aligned benchmark to ensure alignment with the desired decarbonization trajectory of 7% year on year. Water use and waste generation are also made at least equal or lower than that of the reference index. With these portfolio construction rules, credits issued by companies with better ESG scores or environmental footprints are more likely to be included in the portfolio while credits issued by companies with worse ESG scores or environmental footprints are more likely to be divested from the portfolio. Thirdly, 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 for this fund along with short descriptions. For more information please visit the sustainability-related disclosures.

The Solactive Paris Aligned Global Corporate Index posted a credit return of -0.26%, as credit spreads widened. The euro-hedged total return was -1.13%, as underlying government bond yields increased substantially. October was a weak month for credit markets, with credit spreads widening during the month. The Hamas-Israel conflict dominated news headlines and raised concerns about a broader conflict in the Middle East. Commodities like oil and gold traded higher during the month. Most companies reported decent quarterly earnings, although many companies mentioned that economic activity is decelerating. However, US Q3 GDP growth came in at a staggering annualized rate of 4.9%. The US labor market also remains strong and employment costs continue to rise. On top of that, investors are concerned about the US funding gap, debt ceiling discussions and the new House speaker Mike Johnson. The US 10-year bond yield rose further and briefly traded through the 5% yield level intraday. 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. Eurozone government bond yields declined in October.

Based on transaction prices, the fund's return was -1.13%. Based on closing prices, the fund posted a relative return of -0.09% versus the benchmark. Issue(r) selection delivered a positive contribution and beta allocation contributed neutrally. Duration hedging inaccuracies at the longest end of the curve detracted. SDG score allocation contributed slightly positively. The value factor delivered the largest positive contribution, followed by smaller positive contributions from low-risk/quality and momentum. The size factor detracted slightly. Sector allocation contributed neutrally, with small underlying effects. Currency allocation contributed slightly positively, primarily due to the overweight in CAD bonds; the underweight in EUR bonds slightly detracted. Country allocation slightly detracted, especially due to the overweight in the United States. The allocation to subordination groups contributed slightly positively, due to the underweight in senior financials. Rating allocation slightly detracted, driven by the off-benchmark position in BAs.

RobecoSAM QI Global SDG & Climate Multi-Factor Credits invests systematically in predominantly investment grade bonds of companies that advance the United Nations Sustainable Development Goals (SDGs) and contribute to maintaining the global temperature rise below 2 degrees Celsius. The selection of these bonds is based on a number of quantitative factors. In the long term, we expect the portfolio to outperform its Paris Aligned benchmark with a similar risk profile by systematically harvesting factor premiums.