Robeco Financial Institutions Bonds D3H USD

Credit spreads widened in August as there were a lot of negative headlines to digest for the market. The outlook for a quick resolution of the trade war has not improved, with both the US and China announcing more tariffs during the month. China also put another weapon at work, as it devalued its currency by circa 4% in several steps. At the same time, increasing social unrest in Hong Kong is adding to the worries for the Chinese government. Global economic data remained fairly weak in August. Part of this weakness can be attributed to the slowdown in global trade. The German economy is feeling this impact too and the continued uncertainty around Brexit is not helping either.In this environment, risk-free rates continued to decline. German 10-year yields declined by 26 basis points and several European countries now have a complete yield curve below 0%. Low rates are weighing negatively on the outlook for profitability, but are also pushing investors to search for yield. Italian spreads outperformed, after it became clear that a new, more Europe-friendly coalition government would be formed. Italian issuers benefited from this change in sentiment.

All currency risks are hedged.

Robeco Financial Institutions Bonds fund make use of derivatives for hedging purposes as well as for investment purposes. These derivatives are very liquid.

The fund aims to pay a quarterly dividend.

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 Financial Institutions Bonds mainly invests in subordinated euro-denominated bonds issued by financial institutions. The fund offers a diversified exposure across 50-60 issuers, including the new style hybrid bonds that are being issued on the back of Basel III regulation. Focus of the fund are higher rated bonds (investment grade) with a tilt to Tier 2 bonds. The fund aims to outperform its index Barclays Euro-Aggregate: Corporates Financials Subordinated 2% Issuer Cap. The index 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 portfolio managers are responsible for the portfolio construction. A proprietary developed risk management approach avoids high risk concentration in the portfolio. As the investment process is well-structured and proven over time, it contributes to repeatable performance delivery. 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.