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Based on transaction prices, the fund's return was -1.11%. The fund posted a negative absolute return in October, as core bond yields rose. The performance of the fund was in line with the index. The fund’s overweight duration position and yield curve flattening position detracted from performance, while the overweight in European peripheral bonds added to performance. We continue to like peripheral bonds in the current environment, but also like to have some deliberate hedges in place via duration and curve positioning. After the move higher in yields that we have experienced over the month, we expect that upcoming ECB bond buying will put a lid on how much further yields can rise.
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Government bonds posted negative returns in October, reflecting more constructive news on China-US trade talks and a more positive view on Brexit developments. German Bunds were down -1.5% on the month, US Treasuries -0.2% and UK Gilts lost -2.2%. Euro periphery bonds fared slightly better than Bunds, with returns of about -0.7% for Spain, Italy and Ireland, and even a modest positive return (0.2%) for Portugal. The better returns in these markets can be linked to Brexit optimism and the continued effects from the decision to restart the ECB’s bond purchase program. The October ECB meeting brought little news, apart from comments on capital key rules, which stipulate the division of government bond purchases across countries, suggesting some flexibility to buy more periphery debt. The FOMC’s decision to cut rates and give a neutral guidance was in line with expectations and had only a modest impact on bond prices.
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Sustainability Themed Fund |
The fund is not exposed to currency risks, as the fund invests in Euro-denominated bonds.
Robeco Euro Government Bonds makes use of government bond futures. These derivatives are regarded very liquid.
The fund does not distribute dividend. The income earned by the fund is reflected in its share price. This means that the fund's total performance is reflected in its share price performance.
In our government bond portfolios, the active country allocation is based on a combination of top-down and bottom-up analysis. In the bottom-up analysis, besides debt sustainability and economic cycle, ESG criteria are an integral part of our analysis. For our top-down analysis, our in-house developed RobecoSAM Country Sustainability Ranking (CSR) is used in our country allocation decisions. The CSR acts as an early-warning system which helps us to identify problems as well as opportunities in countries well before they are reflected in spreads, or are picked up by the rating agencies.
The Robeco Euro Government Bonds fund invests in euro denominated bonds issued by the EMU countries. Investing in euro government bonds calls for active management in order to cope with country risks and interest rate risks. The fund performance is driven by multiple drivers, of which country allocation is currently the most dominant. The team is actively allocating across core and peripheral European exposure, and as such investors can benefit from spread movements whilst keeping investment risks under control. The fund aims to outperform its index Barclays Euro-Aggregate: Treasury. The aim of the country allocation decisions is to confront price differences between Eurozone countries with divergences in economic and political developments. Country views can capture either broader trends (for example changes in European policy) or country specific developments. Both are assessed in a structured way, combining top-down (macro environment & policy, valuation, sentiment & positioning) and bottom-up inputs (a country's debt sustainability, macro-economic cycle, ESG profile). Next to country allocation, active duration and yield curve positioning are the other drivers of alpha. Risk budgeting can be adaptive through time in order to capture the most compelling investment opportunities.
Risk management is fully embedded in the investment process so as to ensure that the fund's positions remain within set limits at all times.
Central banks around the globe are in an easing mode and both the Fed and ECB have announced stimulus measures in recent meetings. At the same time, there is growing reluctance to cut official rates further among central banks whose rates are in negative territory. This reluctance can be linked to an increasing attention for the ‘reversal rate’, the rate at which further cuts will have negative economic consequences. The Riksbank will likely hike rates in December, based on this argument. These considerations do confirm the idea that prospects are weaker for bond markets where official yields have broken zero.
Michiel de Bruin is Co-Head of the Fixed Income Global Macro team and Co-Manager of Euro Government Bonds. Prior to joining Robeco, Michiel worked for BMO Global Asset Management in London, most recently as Head of Global Rates and Money Markets. He held various other positions before that, including Head of Euro Government Bonds. The roles he fulfilled before joining BMO included Co-Head of Fixed Income Sales and Trading at NIB Financial Markets in Amsterdam. Michiel started his career in the industry in 1986 and he holds a Bachelor's degree from Amsterdam University of Applied Sciences. Mr. van IJzendoorn is a Portfolio Manager in Robeco's Global Fixed Income Macro team. Prior to joining Robeco in 2013, Stephan was employed by F&C Investments as a Senior Portfolio Manager Fixed Income. Before his move to F&C Investments he worked in similar functions at Allianz Global Investors and A&O Services. Stephan started his career in the Investment Industry in 2003. He holds a Bachelor's degree in Financial Management, a Master's degree in Investment Management from the VU University Amsterdam and is CEFA charterholder.
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ISIN | LU0301741277 |
Bloomberg | ROEGZEU LX |
Valoren | 3244084 |
WKN | A0YFG4 |
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1st quotation date | 1180051200000 |
Close financial year | 31-12 |
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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 0.01% 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.
Investors who are not subject to (exempt from) Dutch corporate-income tax (e.g. pension funds) are not taxed on the achieved result. Investors who are subject to Dutch corporate-income tax can be taxed for the result achieved on their investment in the fund. Dutch bodies that are subject to corporate-income tax are obligated to declare interest and dividend income, as well as capital gains in their tax return. Investors residing outside the Netherlands are subject to their respective national tax regime applying to foreign investment funds. We advise individual 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 information contained in the website is solely intended for professional investors. Some funds shown on this website fall outside the scope of the Dutch Act on the Financial Supervision (Wet op het financieel toezicht) and therefore do not (need to) have a license from the Authority for the Financial Markets (AFM).
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Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.
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