Can you have a pioneering spirit and yet still exercise caution? At Robeco we have the strong belief that it is possible to be both pioneering and cautious by applying thorough research and past experience: you need to know what you are doing.
When man first went to the moon, he came back again safely. Robeco has applied this approach to sustainability and quantitative investing, among others. We have developed quantitative strategies based on in-depth research and back tests. And new approaches to applying sustainability criteria for better-informed investment decisions.
Robeco has long had a pioneering spirit, rooted in caution. The company was founded just after the Wall Street crash in 1929 by a group of prominent Rotterdam businessmen who wanted to offer a safer means of buying stocks. Their pioneering spirit became grounded in the new, more cautious, collective approach, starting us out on the road of fund management.
“We actively pursue innovation, while convinced that our client portfolios and the insights we gain need to be deeply rooted in knowledge and research. We welcome new opportunities, but based on strong foundations,” says Roderick Munsters, chief executive of Robeco.
“One of the strongest concepts in investing is diversification, which can also be applied to innovation. We do not have an innovation-only approach; we are sometimes in harvesting mode, sometimes in renewal, and sometimes we need to revert to proven strategies. We have a flourishing family of investment strategies at our disposal.”
‘The insights that we gain need to be deeply rooted in knowledge and research’
Our commitment to research goes back to the very beginning, when the company’s first chief executive, Lodewijk Rauwenhoff, said: “Every investment strategy should be research driven”. He set the tone for what would become Robeco’s pioneering work in investing.
“Research is common in asset management, but what is typical for Robeco is our thorough belief that it should be the basis of everything we do,” says Edith Siermann, head of Fixed Income Investments. “Exchanging knowledge and ideas across teams and asset classes is typical for the Robeco approach. We can easily apply lessons that we learn in one asset class to another, which is something you see less often elsewhere.”
“We have an edge here: we are capable of combining our findings and applying them in different areas. We can use our experience in research across existing investments, which gives us deeper insight and a more balanced approach.”
“For example, we successfully apply a strategy used in equities to bonds. Robeco's Conservative Credits strategy exploits the low-risk anomaly by investing in bonds with a below-average maturity from issuers with below-average risk. It is remarkable how similar the approaches used for bonds and equities can be.”
“Robeco’s research projects have yielded a number of groundbreaking innovations over the years, some of which have become market standard. Take for example our Credit Risk Model, which measures bond portfolio risk based on current credit spreads. It gives insight into the nature and extent of risk in credit portfolios, allowing swift reactions to changing market conditions,” adds Siermann.
“Our quantitative researchers are not ‘ivory tower’ researchers coming up with variables; quantitative research is done in close cooperation with portfolio managers and analysts to make sure we make it work in the real-world perspective.”
“Anyone with a quantitative approach can call themselves a quant provider. But the experience we have gathered over the years, the variety of clients we serve and the level of sophistication that we have achieved, our connections to academia, including Erasmus University in Rotterdam, and the drive of our people to publish in renowned journals puts us pretty much ahead of the pack,” adds Munsters.
‘Our quant researchers are not people in ivory towers’
Sustainability investing is another area where Robeco has set the tone since the 1990s. Robeco is unique in integrating ESG across its entire equities and fixed-income range, while also offering specialist sustainability funds. Robeco has around EUR 100 billion in assets (end of 2013) that have ESG overlays. We believe that sustainability investing leads to better-informed investment decisions. We approach sustainability investing from a financial material perspective, moving it out of the green domain.
“One of our strong points is that we don’t do it because part of society likes it – we have a conviction of our own that it adds to the risk/return profiles of our clients’ portfolios,” says Munsters. “It brings something to the table. We can identify risks, see more opportunities, and we have a better understanding of the companies in which we invest.”
“Sustainability investing is moving into the mainstream, but there is still a pioneering element to it, because the focus is shifting from practicing sustainability in terms of checking the box to actually demonstrating its implementation and obtaining returns. In this area there is still a lot of room for pioneering,” adds Siermann.
Leveraging talent is a strong element in Robeco’s approach. “Our organization is flat; we empower people to come up with ideas and we listen to what they have to say,” says Siermann. “Everyone is welcome to participate. This is in Robeco’s DNA and part of Dutch culture.”
“The Dutch have a history of fighting a common enemy: water. You can only fight that if you do it together,” says Munsters. “You need to co-ordinate, discuss, and then to come to a conclusion. This may take a while, but it will be time well spent, because you can make use of the knowledge and talents of many people. That is how, for 85 years, we have managed to combine our pioneering spirit with a sense of caution, and why we are eager to go on doing so for at least another 85.”