Robeco High Yield Bonds FH EUR

The coronavirus continued to spread and Europe saw a significant uptick in cases. Equity markets responded brutally, trading down by more than 10%, as investors braced for the economic impact of the virus. Volatility indices spiked and the US 10-year Treasury yield declined by 40 bps to a level of 1.14%. Commodity prices took a nosedive as well, with WTI crude oil dropping to a very low level and the Henry Hub gas price declining to a level below USD 1.65. Global supply disruptions are evident and this can potentially lead to lower growth worldwide. High yield assets responded with more than 100 bps of spread widening and substantial outflows in ETFs and mutual funds for the month. In the US high yield market, energy-related sectors were once again the biggest underperformers. Independent E&P (-10%) and oil field services (-8%) declined as crude oil prices fell to the lowest level in over a year. Leisure (amusement parks, cruise liners) was down 4.3%, clearly reflecting the impact of the virus. The best-performing sectors were wireless, which responded positively to the Sprint/TMUS merger. The global high yield index spread widened to a level of 494 bps, with an average yield of 5.83%.

All currency risks are hedged.

Robeco High Yield Bonds make use of derivatives for hedging purposes as well as for investment purposes. These derivatives are very liquid.

The fund does not distribute dividend. The income earned by the fund is reflected in its share price. The fund's entire result is thus reflected in its share price development.

Our analysis of issuers goes beyond the traditional financial factors and includes the issuers’ performance on ESG factors. We deem it essential for a well-informed investment decision to take into account those ESG factors that have the potential to materially impact the financial performance of the issuer. This perfectly matches the basic need to avoid the losers in credit management, as many credit events in the past can be attributed to issues such as poorly designed governance frameworks, environmental issues, or weak health & safety standards. The aim of ESG integration is to improve the risk/return profile of the investments and does not have an impact goal. ESG analysis is fully integrated in the bottom-up security analysis. We have defined key ESG factors per industry, and for every company we analyze how the firm is positioned versus these key ESG factors, and how this impacts the fundamental credit quality.

Robeco High Yield Bonds invests in corporate bonds with a sub-investment grade rating, issued primarily by US and European issuers. The portfolio is broadly diversified across circa 250 issuers, with a structural bias to the higher rated part in high yield (BB/B). Performance drivers are the top-down beta positioning as well as bottom-up issuer selection. The fund aims to outperform its index Barclays US Corporate High Yield & Pan European High Yield ex Financials 2.5% Issuer Cap. The index excludes high yield financials based on relatively high systematic risk, and applies an issuer cap to avoid concentration risk. The investment philosophy is based on managing a solid diversified portfolio with a long term view. Top-down beta positioning is based on the outcome of our credit quarterly outlook meeting, in which the team is discussing the fundamental market outlook, valuation of bond markets and market technicals. Bottom-up issuer research is executed by our credit analysts, who execute the fundamental analysis. The analysts research reports are being discussed in approx. 500 credit committees per year. In addition, a proprietary quant issuer selection model is used as an independent performance driver. The portfolio managers are responsible for the portfolio construction. A proprietary developed risk management approach avoids high risk concentration in the portfolio. Holdings in equities can only appear in the portfolio as a result of corporate actions and/or debt restructuring. It is not the intention of the portfolio manager to use options or swaptions. As the investment process is well-structured and proven over time, it contributes to repeatable performance delivery. The Robeco High Yield fund is managed by our credit team which consists of eight portfolio managers and thirteen credit analysts. Within the team, Sander Bus and Roeland Moraal are responsible for high yield. Sander has been involved in the fund since inception in 1998, Roeland joined in 2003. The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team's fundamental research. Duration of the portfolio is managed in line with the index and currency exposure is hedged.

Risk management is fully embedded in the investment process to ensure that positions always meet predefined guidelines.