Robeco Sustainable Property Equities F 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 0.05% 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.

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 with a small negative return, but sprung back to life in July with a sizeable return as interest rate expectations changed dramatically in July, while the REITs also reported Q2 earnings which were well received. July's macroeconomic reports pushed bond yields lower and added to expectations of interest rate cuts. The odds assigned by the market to a first 25 bps Fed rate cut in September jumped to an almost certainty. The market is now pricing in a total of three rate cuts before year's end. 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 4.79%. The sector performed well in July, supported by signs of improving real estate markets, lower interest rates and companies reporting better-than-expected earnings. CBRE (+25.2%) increased full-year earnings guidance, now expecting mid to high-teens profit growth, driven by stronger-than-expected transaction activity. Logistics warehouse owners/developers within the PropTech segment, Prologis (+11.2%) and Rexford Industrial Realty (+11.3%) reported better-than-expected earnings, with the Prologis co-founder and CEO Hamid Moghadam commenting: "While customer demand remains subdued, it is improving, and we expect that trend to continue as the construction pipeline shrinks". However, this positive contribution to the relative performance from PropTech was balanced with a negative contribution from stocks in the Sustainable Cities trend segment, such as Hang Lung Properties (-14.5%), Swire Properties (-1.7%) and Sun Hung Kai Properties (-0.6%). These three Hong Kong-listed stocks continued their underperformance streak as weak macrodata from China and in particular a slowdown in luxury product sales weigh on sentiment.

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.