Robeco Sustainable Emerging Stars Equities F USD

Jaap van der Hart is the Lead Portfolio Manager of Robeco’s High Conviction Emerging Stars strategy. Over time, he has been responsible for the investments in South America, Eastern Europe, South Africa, Mexico, China and Taiwan. He also coordinates the country allocation process. He started his career in the investment industry in 1994 at Robeco's Quantitative Research department and moved to the Emerging Markets Equity team in 2000. Jaap holds a Master's in Econometrics from Erasmus University Rotterdam. He has published several academic articles on stock selection in emerging markets. Karnail Sangha is a Portfolio Manager within the Emerging Markets Equity team and provides analytical research coverage on India. He is Co-Portfolio Manager for the Emerging Stars and Sustainable Emerging Stars Equity strategies. Prior to joining Robeco in 2000, Karnail was a Risk Manager/Controller at Aegon Asset Management where he started his career in the industry in 1999. He holds a Master's in Economics from Erasmus University Rotterdam and is a CFA® charterholder. Karnail is also fluent in Hindi and Punjabi.

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, 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.

In January, emerging markets gained 6% (EUR), thereby outperforming developed markets, which increased 5.2% (EUR). After a disappointing 2022, investor sentiment rapidly improved with China's reopening, and now even international travelers are allowed to enter without quarantining. Positive policy shifts from Beijing combined with expectations of a strong economic recovery in the second half of this year gathered steam. As a result, the tech-heavy equity markets of South Korea and Taiwan joined the rally, where investors now also see potential for a bottom in the semi down-cycle. A weak US dollar, historically positive for EM equities, also further supported sentiment. Commodities such as iron ore, copper, steel and aluminum performed relatively well. Markets that did well in January were Mexico, South Korea, Taiwan, Greece, China and Chile. Markets that lagged were India, Turkey, the UAE and Kuwait. In India, the equity market but foremost the Adani group of companies came under severe pressure after a short-seller report reflected multiple corporate governance-related allegations.

Based on transaction prices, the fund's return was 10.50%. In January, the fund outperformed its reference index (MSCI Emerging Markets), driven by both country and stock selection. The underweight in both India and Saudi Arabia combined with an overweight in South Korea contributed positively to country allocation. The negative country allocation result came mostly from the underweight position in China. Holdings in the fund that outperformed were to be found in South Korea, where Hana Financial (bank), Samsung SDI, LG Electronics and LG Chemical all did well in January. In China, Alibaba (e-commerce), Yadea (electric two-wheelers) and Lufax (fintech) performed strongly. Naspers (South African internet holding company), Grupo Banorte (Mexican Bank) and TSMC (Taiwanese foundry) also did well in January. Stocks that detracted from performance in January were Raizen (Brazilian biofuels), PICC P&C (Chinese insurance), CJ CheilJedang (South Korean food processor) and Bank Rakyat (Indonesian lender). Not owning Tencent (Chinese internet) also detracted from the relative performance, as the stock did well in January.

The global environment is still challenging for equity markets, with high inflation across the world, growth slowing down and the main central banks raising interest rates to fight inflation. On the margin, however, the outlook is improving, as inflation is likely to peak and already declining in some countries, and global central banks may slow the hiking process. Emerging markets were early in hiking interest rates this cycle, so they are now also closer to the peak. Finally, the economic outlook in China is improving, as it has ended the strict Covid measures and has announced more economic policy support. After this year's correction, market valuations have become more attractive, and in particular for emerging markets they are now at longer-term averages. In addition, emerging markets are attractively valued relative to developed markets with discounts of around 30% based on earnings multiples.