Robeco High Yield Bonds CH USD

Sander Bus is Co-Head of the Credit team and Lead Portfolio Manager Global High Yield Bonds. He has been dedicated to High Yield at Robeco since 1998. Previously, Sander worked for two years as a Fixed Income Analyst at Rabobank where he started his career in the industry in 1996. He holds a Master's in Financial Economics from Erasmus University Rotterdam and he is a CFA® charterholder. Roeland Moraal is Lead Portfolio Manager European High Yield in the Credit team. Before assuming this role, he was Portfolio Manager in the Robeco Duration team and worked as an Analyst with the Institute for Research and Investment Services. Roeland started his career in the industry in 1997. He holds a Master's in Applied Mathematics from the University of Twente and a Master’s in Law from Erasmus University Rotterdam. The Robeco High Yield 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.

For private taxpayers in the Netherlands their assets in the fund belong in box 3. Investors pay on balance 1.2% investment yield tax per year on their average nets assets in box 3. The above is based on current fiscal legislation in the Netherlands. Shareholders are advised to consult their tax adviser regarding their own specific circumstances. In the Netherlands 25% dividend tax is deducted on cash dividends for all shareholders (regardless of where the shares are held). Shareholders who are not liable to pay tax in the Netherlands and are living in countries with a Double Tax Relief Treaty with the Netherlands may, depending on the treaty, re-claim a part of the dividend tax from the Dutch fiscal authorities. For fiscal questions we advise individual investors to contact their service channel or fiscal adviser.

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 2% 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.

Markets got off to a very strong start of the year in January: all asset classes were in positive territory, with the exception of energy commodities. This could be seen as good news for consumers who suffered from higher energy prices last year. Especially in Europe, where gas futures continued to decline close to 25% in January. Chinese assets have continued to perform strongly on the back of the economy's reopening. This has supported a strong rally amid industrial metals. On the other hand, this reopens the discussion around inflationary pressures from the east. US recession fears were still very topical during the month. This was confirmed by disappointing ISM data coming in for both servicing and manufacturing components, which fueled speculation around central banks that might be nearing the end of their current hiking cycle. Both central banks denied any discussion of ending the current cycle, as stronger-than-expected inflation was still evident. Capital markets reopened with close to EUR 20 bln coming to market in January. Furthermore, we saw five defaults (USD 5.4 bln). Spreads and yields tightened 50 and 80 bps respectively and are now 424 bps and 7.86%.

Based on transaction prices, the fund's return was 3.12%. The high yield bond index had a positive total return in January at 3.41% on the back of tighter spreads in combination with tighter underlying rates. The latter was driven by mild relief expectations around the Fed's future rate hike policy. The fund underperformed its benchmark this month. The underperformance was mainly driven by our underweight beta as valuations moved below long-term averages (-36 bps). Our issuer selection also detracted some performance (-20 bps) for the month, as our quality bias made a negative contribution. Our regional overweight Europe versus US was a small detractor, as US spreads outperformed EUR spreads by a slight margin. On an issuer level, we gained by not owning issuers like Bausch Health (3 bps), Lumen (2 bps) and Dish Network (2 bps). The largest detractor was having a large underweight in Carnival Cruises (-6 bps), where bonds recovered from distressed levels, as order books for the coming season are starting to look in good shape.

Our base case is that the US as well as Europe will experience a recession in 2023. Although we expect the recessions to play out to be mutually reinforcing, the root cause will be different. The US is likely to experience a classic boom-bust cycle, whereas the European recession will be driven largely by an energy supply shock. As the probability of a recession rises and becomes part of the consensus view, market dispersion will increase. The lower-quality end of the credit spectrum is likely to see an increased default rate, while the higher end could benefit from lower rates and a flight to quality. Once a recession is fully priced in and spreads reach their own peak, that would be the time to go outright long, even in high yield. Typically, that point is reached well before default rates have peaked. The Fed and the ECB are determined to keep monetary policy tight until they see confirmation that inflation will reach their target. The good news is that inflation has started to moderate, which means the end of the hiking cycle is in sight. But that does not mean the Fed is anywhere close to cutting rates. Beta has decreased a bit as valuations have moved to long-term averages.