Robeco High Yield Bonds IH USD

High yield bond markets managed to generate another positive total return, for the ninth month in a row. For July, the return driver was the underlying decline in government bond yields. High yield spreads actually widened over the month, resulting in a small negative credit excess return. Since the start of 2021, spreads declined by about 50-60 bps, resulting in more than 400 bps of credit excess return over treasuries. USD HY underperformed EUR HY in July by a small margin, but has performed much better on a YTD basis.The big theme in July was the move in treasury yields. The 10-year US Treasury yield declined further, from 1.45% to 1.22%. With all-in yield levels of close to 4% in the US and approaching 3% in Europe, borrowing for high yield-rated companies has never been this cheap. Unsurprisingly, primary activity remains very busy. July was once again a record-breaking month. After only seven months, US HY issuance is already higher than in all but four full calendar years we had so far. With such easy access to capital, defaults remain scarce. In the past month, not a single default was recorded. The default rate is approaching 1%, way below the long-term average of 3.5-4.0%.

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 is an actively managed fund that invests in high yield corporate bonds. The selection of these bonds is mainly based on fundamental analysis. The fund's objective is to provide long term capital growth. The fund aims for a better sustainability profile compared to the Benchmark by promoting certain ESG (i.e. Environmental, Social and corporate Governance) characteristics within the meaning of Article 8 of the European Sustainable Finance Disclosure Regulation and integrating ESG and sustainability risks in the investment process. In addition, the fund applies an exclusion list on the basis of controversial behavior, products (including controversial weapons, tobacco, palm oil and fossil fuel) and countries. The fund invests in corporate bonds with a sub-investment grade rating, issued primarily by issuers from developed markets (Europe/US). The portfolio is broadly diversified, with a structural bias to the higher rated part in high yield. Performance drivers are the top-down beta positioning as well as bottom-up issuer selection.The majority of bonds selected will be components of the Benchmark, but bonds outside the Benchmark index may be selected too. The fund can deviate substantially from the weightings of the Benchmark. The fund aims to outperform the Benchmark over the long run, whilst still controlling relative risk through the applications of limits (on currencies and issuers) to the extent of deviation from the Benchmark. This will consequently limit the deviation of the performance relative to the Benchmark. The Benchmark is a broad market weighted index that is not consistent with the ESG characteristics promoted by the fund.

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