Robeco Emerging Markets Smaller Companies Eq.D EUR

In December, the MSCI Emerging Markets Midcap Index declined by 1.99% in euros, still significantly better than the sharp 8.5% correction for developed markets. Main reasons for the correction were fears on a global growth slowdown and a further interest rate hike by the Fed. Also, the arrest of the Huawei CFO led to less hope for a quick solution of the China-US trade conflict. Best emerging countries were Mexico, Peru, Indonesia, whilst Pakistan, China, Greece and UAE were the worst performing. The Mexican market was supported by the first budget of president López Obrador, which is considered to be prudent. For the full year 2018, the MSCI Emerging Markets Midcap Index declined by 8.7% in euros, lagging the 4.1% drop for developed markets. Key global developments were the tightening of monetary policy by the Fed and the more aggressive US trade policy with, amongst others, additional tariffs on imports from China.

The fund is allowed to pursue an active currency policy to generate extra returns. However, given the high transaction costs involved, the fund will be reluctant to use this possibility.

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.

For Robeco Emerging Markets Smaller Companies Equities, ESG factors are incorporated in the investment and decision-making process. A proprietary bi-annual corporate governance questionnaire is an integral part of the fundamental framework. The team assesses shareholder, board, management, government, social and environmental factors where appropriate. The team also includes ESG considerations in their country allocation process. ESG-based considerations impact the stock valuation analysis. Relevant ESG issues are discussed with company management on a case by case basis. Input from RobecoSAM Sustainability analysts is used to further enhance ESG integration in the investment process.

Robeco Emerging Markets Smaller Companies invests globally in emerging economies. The focus is on companies which combine a sound business model and solid growth prospects with a reasonable valuation. These companies are less internationally active and their performance has a strong relation with the domestic economic development. The first step in portfolio composition is the top-down country selection, as research shows that country specific factors drive stock returns in emerging markets. The second step is in-depth fundamental analysis of companies and serves to identify stocks with the ability to outperform in the long run. Key items of our fundamental analysis are: growth prospects of sector, position of company within sector, competitive strength, financial health and strategy, corporate governance and management quality. We screen stocks with our proprietary quantitative model for attractive characteristics. Risk management is fully integrated in the investment process to ensure that positions meet predefined guidelines and the portfolio is well diversified. The fund can protect investors from negative currency developments through active currency hedging. The fund aims to be fully invested. Robeco Emerging Markets Smaller Companies aims to outperform the MSCI Emerging Markets Mid Cap Index over a full market cycle. This Sub-fund may invest in China A-shares via the QFII and/or a Stock Connect Programme which may entail additional clearing and settlement, regulatory, operational and counterparty risks.

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