RobecoSAM Circular Economy Equities D EUR

Natalie Falkman is Portfolio Manager of the RobecoSAM Circular Economy Equities strategy. Before joining Robeco in 2022, she was a portfolio manager for Kapitalinvest, a global equity, 5-star rated by Morningstar, fund at Swedbank Robur in Stockholm. Prior to that, she worked as the Head of Emerging Markets research at Carnegie (formerly HQ Bank), covering Eastern Europe and Africa, before shifting her focus to Nordic stocks. She started her career in 2002 as an equity research analyst at Deutsche Bank in Moscow covering utility and shipping sectors. Natalie holds a Master in Finance from Stockholm School of Economics.

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's sustainable investment objective is to finance solutions that support the transition from traditional production and consumption patterns toward a circular economy. Circular economy and sustainability considerations are incorporated in the investment process by the means of a target universe definition, exclusions, ESG integration, and voting. The fund only invests in companies that have a significant thematic fit as per Robeco's thematic universe methodology. Through screening on both Robeco's internally developed SDG Framework and Robeco’s exclusion policy, the fund does not invest in issuers that have a negative impact on the SDGs, are in breach of international norms or where products have been deemed controversial. Financially material ESG factors are integrated in the bottom-up fundamental investment analysis to assess existing and potential ESG risks and opportunities. 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 first two weeks of the Q1 earnings season revealed an astonishing breadth of earnings beats. With that said, the big tech names provided the main fuel for the continued SPX rally. The often conflicting macro data points and companies' market comments leave room for both bears and bulls to stay entrenched in the respective views. However, the continued market resilience has been supported by investors' overall cautious views and positioning. This is exemplified by equity strategists' average end-of-year target price for the S&P 500 being below current levels. Currently, the Bloomberg collected consensus average target price for year-end for the S&P 500 is 4,025. The S&P 500 closed at 4,169 on the last day of April. In this continued uncertain environment, we prefer exposure to two main fundamental themes. First, we favor exposure to companies that are market share takers in their respective segments. The second area we favor are the segments that can retain growth momentum, also in uncertain and weaker markets. These areas are often linked to sustainability themes.

Based on transaction prices, the fund's return was -2.02%. In April, the strategy underperformed the broader MSCI World. There are a number of areas in which the fund is underweight relative to the broader MSCI World and in the month of April, this was detrimental to performance. The main underweight areas that were behind the fund's relative underperformance were big pharma and big tech names, financials, consumer staples and the fund's overall tilt towards mid caps. The top contributors came from a variety of different sectors. They were mainly companies that already reported their Q1 numbers, which showed good results for 2023's first three months and good guidance for the remainder of the year. Examples of some of the key performance contributors are Hubbell, EssilorLuxottica, Atlas Copco, Kone and Republic Services. The same reasoning does not apply to the stocks with the largest negative contribution. Most of these stocks have not yet reported. There was no one single theme that was shared by the stocks with a weaker monthly performance and there was nothing that we believe needs to be addressed by changing the portfolio composition. In April, the strategy performance was largely in line with the internal thematic benchmark.

The visibility so far this year is better than in 2022, when macro clearly dominated micro. However, the main bull-bear debate between a soft and a hard landing of the economy remains unresolved. April produced both positive and negative data points, without the scale being tipped. In the current environment we remain patient, as high volatility occasionally presents attractive opportunities. In addition, we focus on two fundamental areas. First, we look for exposure to companies that are market share gainers in their respective segments. Secondly, we seek exposure to areas that are able to sustain growth momentum, also in weaker economic conditions. These areas are often linked to sustainability themes and have support from regulations, government-backed investments or both. These areas also often provide better visibility into future growth opportunities and help exposed companies make investment decisions that will ultimately result in earnings growth and reduce earnings volatility.