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Based on transaction prices, the fund's return was 0.25%. The global high yield index delivered a total return of around 1% in August, bringing the total return for the year close to positive territory. During the month, spreads tightened 20 bps. Underlying government bonds were slightly wider by 8 bps. The fund underperformed the index by around 20 bps, depending on the share class (gross of fees). Our cautious beta positioning was a detractor of 22 bps. Our preference for EUR high yield at the expense of USD was a positive contributor this month. Excess returns in EUR high yield reached nearly 2%, while in US high yield the excess return was 1.2%. Our quality bias made a flat contribution, as all rating classes performed more or less in line on a risk-adjusted basis. In sector terms, those most directly impacted by the economic fallout outperformed this past month, i.e. airlines (+6.4%) followed by leisure and transportation (+3.6%). On an issuer level we benefited from our overweight in Selecta (4 bps), whose bonds jumped 10 points as second quarter earnings were better than expected. Biggest detractor was our overweight in Nabors (-3 bps), because the oil servicing sector is experiencing some headwinds with subdued capital expenditure by E&P companies.
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The global high yield market prolonged its recovery, printing another month with positive total returns that were close to 1%. The backstop provided by governments and central banks continues to be the main driver behind the spread tightening. This, in combination with better than expected corporate earnings, an uptick in macroeconomic data and positive developments on a vaccine for Covid-19, continues to fuel the spread rally. Oil prices kept on rising to a 5-month high, helped by improving economic activity. High yield issuers continue to issue debt at a record pace. The first two weeks of August produced the second and fourth largest volumes on record. This was backed by increasing demand from investors that continue to pour money into the asset class, reaching USD 6 billion in August. The performance was very broad-based, as all sectors printed positive returns, just showing how strong the current market is. Spreads finished the month 20 bps tighter at a level of 474 bps. The average yield to worst of the global high yield index ended the month at 5.10%.
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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.
The economic fallout that we saw in 20Q2 was unlike anything we have ever seen in our careers. The Covid-19 pandemic elicited a massive unconventional, coordinated series of stimulus by policy makers financed by central banks. Markets have since soared and are treating Covid-19 as a growth shock in an otherwise fine economic environment. But while Covid-19 is the proximate trigger, we firmly believe current events are not just about the virus. They have deep secular and cyclical roots. To justify this rally, we really need a normalization in earnings. We have our doubts that this will materialize. We are in the middle of a deep recession, with increasing numbers of defaults and heightened uncertainty surrounding future corporate earnings. We have gone underweight in high yield. Dispersion remains high and the accelerated downgrades into the lowest ratings make us cautious. Technicals rule for now but fundamentals matter and they remain uncertain for the time being.
Mr. Bus is Head of the Credit team and manages our high yield portfolios. Prior to joining Robeco in 1998, Mr. Bus worked for Rabobank as a fixed income analyst for two years. Mr. Bus holds a Master's degree in Financial Economics from Erasmus University, Rotterdam. He became a CFA charter holder in 2003 and is registered with the Dutch Securities Institute. Mr. Bus has been active in the industry since 1996. Mr. Roeland Moraal, Vice President, CEFA, Portfolio Manager. Roeland is a Senior Portfolio Manager High Yield within Robeco's Credit team since January 2004. Before assuming this role, he was portfolio manager in our Rates team for two years and worked as an analyst with the Institute for Research and Investment Services for three years. Roeland started his career in the investment industry in 1997 at Robeco. He holds a Master's degree in applied mathematics from the University of Twente and a Master's degree in Law from Erasmus University, Rotterdam. Roeland became a CEFA charter holder in 2000 and he is registered with the Dutch Securities Institute.
The Robeco High Yield fund is managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts. The portfolio managers are responsible for the construction and management of the credit portfolios, whereas the analysts cover the team’s fundamental research. Our analysts have long term experience in their respective sectors which they cover globally. Each analyst covers both investment grade and high yield, providing them an information advantage and benefiting from inefficiencies that traditionally exist between the two segmented markets. Furthermore, the credit team is supported by three dedicated quantitative researchers and four fixed income traders. On average, the members of the credit team have an experience in the asset management industry of seventeen years, of which eight years with Robeco.
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ISIN | LU0398248921 |
Bloomberg | RGHYBID LX |
Valoren | 3251005 |
WKN | A0YFGL |
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1st quotation date | 1231804800000 |
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 Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any US Person. A US Person is defined as (a) any individual who is a citizen or resident of the United States for federal income tax purposes; (b) a corporation, partnership or other entity created or organized under the laws of or existing in the United States; (c) an estate or trust the income of which is subject to United States federal income tax regardless of whether such income is effectively connected with a United States trade or business.