RobecoSAM Euro SDG Credits F EUR

Peter Kwaak is Portfolio Manager Investment Grade in the Credit team. Prior to joining Robeco in 2005, he was Portfolio Manager Credits at Aegon Asset Management for three years and at NIB Capital for two years. Peter has been active in the industry since 1998. He holds a Master’s in Economics from Erasmus University Rotterdam and he is a CFA® charterholder. Jan Willem de Moor is Co-Head Portfolio Management Investment Grade in the Credit team. Prior to joining Robeco in 2005, he worked at the Dutch Medical professionals’ pension fund as an Equity Portfolio Manager and at SNS Asset Management as an Equity Portfolio Manager. Jan Willem has been active in the industry since 1994. He holds a Master's in Economics from Tilburg University. The RobecoSAM Euro SDG Credits fundis managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts (of which four financials analysts). The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team’s fundamental research. Our analysts have long term experience in their respective sectors which they cover globally. Each analyst covers both investment grade and high yield, providing them an information advantage and benefiting from inefficiencies that traditionally exist between the two segmented markets. Furthermore, the credit team is supported by dedicated quantitative researchers and fixed income traders. On average, the members of the credit team have an experience in the asset management industry of seventeen years, of which eight years with Robeco.

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.

Investors outside Luxembourg are subject to their national tax regime applying to foreign investment funds. We advise individual investors to contact their financial or fiscal adviser regarding their specific fiscal situation.

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 solely invests in credits issued by companies with a positive or neutral impact on the SDGs. The impact of issuers on the SDGs is determined by applying Robeco's internally developed three-step SDG Framework. The outcome is a quantified contribution expressed as an SDG score, 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. ESG factors are integrated in the bottom-up security analysis to assess the impact of financially material ESG risk on the issuer's fundamental credit quality. Furthermore, the fund invests at least 10% 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.

Credit spreads tightened in July, but this tightening was more than offset by an increase in underlying government bond yields. Several countries experienced a decrease in headline inflation, primarily influenced by the decline in energy prices, but core inflation remained elevated. The ECB kept a hawkish stance and raised interest rates by 25 basis points. The inflation situation in the United Kingdom is even worse and the Bank of England surprised markets with a 50 basis points hike. Similarly, the FOMC struck a hawkish tone by indicating that the Fed is a long way from loosening policy, but nevertheless decided to maintain interest rates during its monthly meeting, signaling the first break in policy after 15 months. In Asia, Chinese economic data continued to disappoint, with manufacturing PMIs declining further due to weak external demand and insufficient domestic demand. Also in Europe several forward looking indicators are flagging recession risk. Even though risks are clearly visible, a sense of optimism in risky assets prevailed. This was visible in lower credit spreads, higher equity prices and declining volatility indicators, both in equities and fixed income.

Based on transaction prices, the fund's return was 0.96%. The underlying portfolio underperformed its benchmark index, gross of fees. The benchmark total return was mainly driven by tighter credit spreads, as the Euro aggregate corporate index tightened by 16 basis points to 147 bps over underlying government bonds. Consequently, European corporate bonds outperformed underlying treasuries. Euro government bond yields moved up, with the 10-year German Bund yield rising 10 basis points to 2.49%. Relative performance is attributed to beta positioning and issuer selection, in line with our investment process. The contribution from our beta overweight position was positive during the month, as we maintained a beta well above 1 throughout the course of the month. This was offset by the negative contribution from issuer selection. On a sector level, our issuer selection in the banking and insurance sectors was a drag on performance this month, while our contribution was positive in consumer non-cyclical and basic industry, albeit to a lesser extent. At the issuer level, the largest positive contributions came from overweight positions in financials like Deutsche Bank and Crédit Agricole, as well as from non-financial corporates like AT&T.

Central banks have been experimenting with monetary policy for many years now. The economic system created debt in all corners of society. A fast and aggressive hiking cycle will reveal many problems, not just at Silicon Valley Bank. A recession could start somewhere toward the end of the year – and we believe central banks will cause one. Recent developments in the banking sector will lead to a further tightening of lending standards, which will put additional pressure on the economy. Our concern is with leveraged sectors that are interest rate sensitive like real estate. We have increased our overweight beta position during March. Valuations had improved after the spread widening, especially in the financial sector. We are far enough into the business and rate cycle that when markets become too bearish, buying on the dip makes sense. This time, the sell-off in bank Tier-1 CoCos and subordinated financials led to a buying opportunity in those segments. Valuations for non-financials are relatively less attractive and valuations for cyclicals are not fully reflecting recession risks at the moment.