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Based on transaction prices, the fund's return was -6.13%. The high yield bond index delivered one of the worst months in history, with a total return at -6.99%. The fund outperformed the index with 113 bps for the month, bringing the year-to-date outperformance to 204 bps. The performance attribution for the month was quite evenly split between beta and issuer selection, 60 bps and 52 bps respectively. We benefited to some extent from our regional bet, being overweight European versus underweight US high yield. On a risk-adjusted basis, we did not benefit from our quality bias, as CCCs outperformed BBs in both regions by a small amount. The energy sector was one of the weaker sectors for the month, after being the clear leader for consecutive months. On an issuer level, being underweight Carnival Cruises was one of the largest contributors (+4 bps). We benefited from our overweight in investment grade credits via EDF, HCA and PulteGroup, all adding 3 to 4 bps. Owning Canpack and Paprec were the two largest laggards for the month (-3 bps). Bonds of the latter traded down a few points following a report that senior members of the group had been taken into police questioning over a deal that took place in 2019.
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Last month, high yield bonds endured their second-largest spread widening since 2008, with spreads moving up 165 bps, reaching a level of 590 bps. Risks about growth in combination with stickier inflation were the main market drivers. US CPI numbers surprised on the upside, whereas manufacturing and consumer confidence surprised on the downside. Quantitative tightening, rate hikes and tighter financial conditions were implemented to slow down consumer demand and keep a strong labor market. Looking back at historical data, a perceived soft landing is nearly impossible to achieve. Growth is already slowing down in the US and in Europe. The latter is feeling the pain even more due to the impact of rising energy prices. European natural gas is up by 15% to EUR 145 per MWh. How central banks will react to a deeper-than-anticipated slowdown together with inflation numbers not coming down, is what is keeping market participants busy. Global recession fears substantially impacted industrial metals prices downward. There were two defaults in high yield (Revlon and TPC Group), totaling USD 1.5 bln in debt. Primary market activity remained on the weak side, with only USD 10 bln coming to the market.
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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.
The fund incorporates sustainability in the investment process via exclusions, ESG integration and engagement. The fund does not invest in credit issuers that are in breach of international norms or where activities have been deemed detrimental to society following Robeco's exclusion policy. Financially material ESG factors are integrated in the bottom-up security analysis to assess the impact on the issuer's fundamental credit quality. In the credit selection the fund limits exposure to issuers with an elevated sustainability risk profile. Lastly, where issuers are flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to engagement.
Robeco High Yield Bonds is an actively managed fund that invests in high yield corporate bonds. The selection of these bonds is mainly based on fundamental analysis. The fund's objective is to provide long-term capital growth. The fund promotes E&S (i.e. Environmental and Social) characteristics within the meaning of Article 8 of the European Sustainable Finance Disclosure Regulation, integrates sustainability risks in the investment process and applies Robeco’s Good Governance policy. The fund applies sustainability indicators, including but not limited to, normative, activity-based and region-based exclusions, and engagement. The fund invests in corporate bonds with a sub-investment grade rating, issued primarily by issuers from developed markets (Europe/US). The portfolio is broadly diversified, with a structural bias towards the higher rated part in high yield. Performance drivers are the top-down beta positioning as well as bottom-up issuer selection. The majority of bonds selected will be components of the benchmark, but bonds outside the Benchmark index may be selected too. The fund can deviate substantially from the weightings of the benchmark. The fund aims to outperform the benchmark over the long run, while still controlling relative risk through the application of limits (on currencies and issuers) to the extent of the deviation from the benchmark. This will consequently limit the deviation of the performance relative to the benchmark. The Benchmark is a broad market-weighted index that is not consistent with the ESG characteristics promoted by the fund.
Risk management is fully embedded in the investment process to ensure that positions always meet predefined guidelines.
The fund incorporates sustainability in the investment process via exclusions, ESG integration and engagement. The fund does not invest in credit issuers that are in breach of international norms or where activities have been deemed detrimental to society following Robeco's exclusion policy. Financially material ESG factors are integrated in the bottom-up security analysis to assess the impact on the issuer's fundamental credit quality. In the credit selection the fund limits exposure to issuers with an elevated sustainability risk profile. Lastly, where issuers are flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to engagement.
This year, US Treasuries had their worst January-to-April period since 1788. On top of that, credit spreads widened. By all standards, we have seen a very significant repricing of fixed income. The world looks grim and it would be easy to extrapolate the bear market. How did the world get into this mess? The policy response to Covid-19 seemed like a great cure during the health crisis, but the combination of massive fiscal and monetary stimulus now turns out to have been an over-extension of an era of largesse that is one of the key ingredients for the disease called inflation. But panic and volatility can also provide opportunities. We already see a few pockets of the market that are starting to look attractive. High yield is not there yet, although we believe that the quality names in high yield already look attractive. Weak single-B and CCC credit still looks vulnerable and has the potential to underperform much more with the increasing likelihood of a recession. To sum up, we firmly remain up in quality and are slowly adding risk at more attractive spread levels.
Sander Bus is Co-Head of the Credit team and Lead Portfolio Manager Global High Yield Bonds. He has been dedicated to High Yield at Robeco since 1998. Previously, Sander worked for two years as a Fixed Income Analyst at Rabobank where he started his career in the industry in 1996. He holds a Master's in Financial Economics from Erasmus University Rotterdam and he is a CFA® charterholder. Roeland Moraal is Lead Portfolio Manager European High Yield in the Credit team. Before assuming this role, he was Portfolio Manager in the Robeco Duration team and worked as an Analyst with the Institute for Research and Investment Services. Roeland started his career in the industry in 1997. He holds a Master's in Applied Mathematics from the University of Twente and a Master’s in Law from Erasmus University Rotterdam.
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 | LU0988110366 |
Bloomberg | RHYOIHC LX |
Valoren | 22729952 |
WKN | A14X6H |
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1st quotation date | 1383868800000 |
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.
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The information contained in the Website is NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws. The value of the investments may fluctuate. Past performance is no guarantee of future results. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency.
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