RobecoSAM Circular Economy Equities D USD

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.

Market sentiment and performance in January strengthened further as the first tentative hopes of a soft landing or no landing rather than a hard landing emerged among investors. The strong market development in January was prompted by a mix of investors' defensive positioning, an approaching peak of the interest rate hike cycle and the anticipated return of Chinese demand. The latest macro data presented a blurred picture, but the key positive was that there were no outsized negative surprises. The market hopes that this will give the Fed the confidence to at least pause its rate hikes this spring. So far, in the Q4 results period, despite relatively muted numbers, the set-up for 2023 could be getting brighter.

Based on transaction prices, the fund's return was 7.14%. In January, the fund slightly outperformed the broader MSCI World Index. The sector allocation component was a negative contributor. This was mainly due to having no holdings in financials, communication services and commodities, and an overweight in the industrial sector that was relatively weaker compared to the broader market. However, the stock selection factor was a positive contributor to the fund's performance. This was especially visible in the industrial space, with two of the fund's top three positive performance contributors being the two industrial companies. The top contributor to the fund's performance was French power semiconductor company STMicroelectronics that reported strong Q4 results and gave strong guidance for 2023. The fund underperformed the internal thematic benchmark due to the benchmark being relatively heavily exposed to semiconductors, software, residential construction and packaging companies. Many of these companies underperformed heavily in 2022 and experienced a strong performance rebound in the first month of 2023.

For long-term investors, the current uncertainty and volatility present many exciting opportunities. Looking out towards the end of 2023 and into 2024, the Fed regime can be expected to be in a different place compared to today's still ongoing interest rate hikes. This could be supportive for growth assets such as climate-change technologies, precision agriculture, data-driven technologies, etc. Regardless of the economic and market developments that will unfold as 2023 progresses, investing in structural growth areas and being patient when it comes to waiting for attractive entry points is an investment strategy that we expect to produce attractive returns for long-term investors.