Robeco Investment Grade Corporate Bonds C 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. The Robeco Investment Grade Corporate Bonds fund is managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit 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 three dedicated quantitative researchers and four 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.

The fund incorporates sustainability in the investment process via exclusions, ESG integration, a minimum allocation to ESG-labeled bonds, and engagement. 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. In the credit selection the fund limits exposure to issuers with an elevated sustainability risk profile. Furthermore, the fund invests at least 5% in green, social, sustainable, and/or sustainability-linked bonds. Lastly, where issuers are flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to engagement.

Financial markets were relatively calm in April, though spreads widened in the second half of the month. Problems in the US regional banking sector continued to pop up. First Republic Bank, which is mainly active in the market for wealthy clients, was the latest victim. The bank faces similar issues as other regional banks, with large unrealized losses on "assets held to maturity". In March, a group of larger US banks provided USD 30 bln of uninsured deposits to this bank to shore up liquidity. This did not turn the tide and the bank was finally acquired by JPMorgan. There was not much spillover of this stress at US regional banks to other sectors or to the European credit market. Spreads widened a bit in the second half of the month. A big part of this widening was driven by a general widening in swap spreads. Spreads over swaps for non-financial corporate debt actually hardly widened in the last weeks of the month.

Based on transaction prices, the fund's return was 0.46%. This return was driven by a decline in credit spreads: the average index spread ended the month at 126 basis points, 8 basis points tighter than at the end of March. Spreads reached an intra-month low at 120 basis points in mid-April, after which spreads widened in the last weeks of the month. The index excess return of corporate bonds over underlying government bonds was positive, at 0.6%. The performance of the underlying portfolio, measured gross of fees, was worse than that of the index. The portfolio had a beta overweight position during the month, which contributed positively. Unfortunately, the positive beta contribution was more than offset by a negative contribution from issuer selection. Subordinated debt underperformed senior debt in April, which meant that the overweight in corporate hybrids contributed negatively. On an individual name level, the largest positive contributors were Pepsi, Accor and Holcim. The largest negative contributions came from the positions in Westlake, OMV, Enel and EDF. In the last three cases we (also) hold hybrids.

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 subordinated debt of financials led to a buying opportunity. Valuations for non-financials did not change that much and valuations for cyclicals are often not fully reflecting the recession risk yet.