Robeco Sustainable Global Stars Equities Fund – EUR E

Michiel Plakman is Lead Portfolio Manager and member of the Global Equity team. He is also Co-Head of Robeco’s Global Equity team. He is responsible for fundamental global equities with a focus on SDG investing and on companies in the information technology, real estate & communication services sectors, as well as portfolio construction. He has been in this role since 2009. Previously, he was responsible for managing the Robeco IT Equities fund within the TMT team. Prior to joining Robeco in 1999, he worked as a Portfolio Manager Japanese Equities at Achmea Global Investors (PVF Pensioenen). From 1995 to 1996 he was Portfolio Manager European Equities at KPN Pension Fund. He holds a Master's in Econometrics from Vrije Universiteit Amsterdam and he is a CFA® Charterholder. Chris Berkouwer is Portfolio Manager and member of the Global Equity team. He is also Deputy Lead Portfolio Manager. He is responsible for fundamental global equities with a focus on the low-carbon transition and on companies in the energy, materials and industrials sectors, as well as portfolio construction. He joined Robeco in 2010. Prior to that, he worked as an analyst for the The Hague Centre for Strategic Studies. He conducted country, industry and company research for various equity teams prior to joining the Global Equity team. He a holds Master's in Business Administration and International Public Management from the Erasmus University Rotterdam and is a CFA® Charterholder. Oliver Attwater is Portfolio Manager and member of the Global Equity team. He is also Deputy Lead Portfolio Manager. He is responsible for fundamental global equities with a focus on companies in the information technology sector and portfolio construction. He joined Robeco in 2021. Previously, he was Head of US Equities at British Airways’ Pension fund based in London, U.K., where he had portfolio management and analyst responsibilities covering all sectors. He holds a Bachelor’s from University College London and he is a CFA® Charterholder.

The fund is established in the Netherlands. The fund is managed as a 'naamloze vennootschap' (public limited company). The fund has the status of 'fiscal investment institution' in the sense of article 28 of the Dutch Corporate-Income Tax Act 1969, and, as such, is taxed at a corporate-income tax rate of 0%.The fund is obliged to pay out the realized current income in the form of dividend within 8 months after the end of the financial year. From 1 January 2007 the fund withholds Dutch dividend tax at a rate of 15% from these dividend payments. The fund can in principle use the Dutch treaty network to partially recover any withholding tax on its income.

For private investors residing in the Netherlands real interest and dividend income or capital gains received on their investments are not relevant for tax purposes. Participating units held by private investors who are taxpayers in the Netherlands belong in Box 3. If and insofar as an investor's net assets exceed the net wealth exemption limit, said investor is liable from 1 January to pay 1.2% annually on the balance of his or her net assets. Investors residing in the Netherlands may offset the Dutch dividend tax withheld (15% as at 1 January 2007) against their income-tax payment. Investors who are not subject to (exempt from) Dutch corporate-income tax (e.g. pension funds) are not taxed on the achieved result. Dutch tax-exempt bodies may seek a full refund on the 15% dividend tax withheld on dividends (25% prior to 1 January 2007). Interest income is exempt from tax withheld at source. 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 in their tax return. In principle, Dutch bodies that are subject to corporate-income tax may offset the 15% dividend tax withheld on dividends (25% prior to 1 January 2007) against the corporate-income tax and seek a refund of the excess amount. Investors residing outside the Netherlands are subject to their respective national tax regime applying to foreign investment funds. Shareholders who do not pay tax in the Netherlands and who are resident in countries that have a tax treaty with the Netherlands to prevent double taxation, may seek a refund for part of the Dutch dividend tax from the Dutch tax authorities, depending on the treaty. As of 1 January 2007, a pension fund having its registered office in another EU member state is also entitled to a dividend-tax refund in the Netherlands. The above is based on the current fiscal legislation and regulation.

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, water and waste footprints 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.

With another escalating geopolitical flashpoint in the form of the Israel/Hamas conflict, left tail risks came to the fore, resulting in a tough month for global equity markets in October (-3% in EUR; -3% in USD). Navigating the interplay of the reporting season against a more nervous macro backdrop, rising yields and markets still trading richly, led to high volatility. As investors digest the first set of profit warnings, mainly in the industrials and consumer discretionary sectors, most companies guide for a sharp deceleration in demand as we exit 2023. Any negative surprise is punished aggressively it seems, with the market clearly avoiding highly leveraged companies with floating debt and refinancing risks as yields continue to climb. After the October rout, it seems the market is again torn between geopolitical de-escalation and more dovish central banks on the one hand, and rising tensions and continuous upward pressure on yields on the other. Although we recognize that several quality hiding areas are becoming crowded, such as within the technology and healthcare sectors, we continue to prefer stronger balance sheet and free cash flow generation companies over anything else.

Based on transaction prices, the fund's return was -1.34%. In the month of October, the portfolio had a strong relative performance, despite a negative absolute return. From a sector perspective, our positioning in consumer discretionary, technology and healthcare paid off the most, while consumer staples detracted. On a stock level, we saw managed care provider UnitedHealth Group contributing the most, helped by a stabilization in medical loss ratios, together with an upbeat set of results and insurance overall holding up better in a higher-for-longer rate environment. Where several tech highfliers struggled to satisfy high expectations, Microsoft certainly did not. Helped by Azure, generative AI and successful price hikes, the company delivered another strong set of results of accelerating topline growth and expanding margins. Furthermore, Eli Lilly once again proved to be a favorite defensive hiding place, lifting the stock higher even without any meaningful company news. On the flip side, we saw further weakness in the life sciences tool space, with Thermo Fisher and industry peers still suffering from a post-Covid hangover, which continues to act as a growth hump they have to cross to restore confidence.

With the macro environment remaining precarious, few business models navigate this relatively unscathed. Rising costs of capital simply result in widening spreads between quality companies and their weaker, more leveraged counterparts. Valuation also provides little support thus far, unless lead indicators clearly bottom out and a proper earnings reset for next year happens. As everyone is looking for a turning point and gauge what the new base level for growth should be, the companies that continue to deliver earnings beats remain our highest-conviction positions in the portfolio. The recent risk-off mood and messy geopolitics clearly hurt equities and bonds alike, but we do not see the market as broken. It is more a recalibration to a higher-for-longer rate world and putting a new multiple on growth, which comes with volatility. And although we are macro aware and share most market concerns, our strategy really is bottom-up oriented, and selectively, we actually see more opportunities arising across the quality spectrum.