Robeco Financial Institutions Bonds D EUR

Jan Willem de Moor is Portfolio Manager Investment Grade in the Credit team. Prior to joining Robeco in 2005, he worked at the Dutch Medical professionals’ pension fund as an Equity Portfolio Manager and at SNS Asset Management as an Equity Portfolio Manager. Jan Willem has been active in the industry since 1994. He holds a Master's in Economics from Tilburg University. Jan Willem Knoll is Portfolio Manager Investment Grade in the Credit team. He joined the Credit team in 2016. Previously, Jan Willem headed the Financials Equity sell-side research team at ABN AMRO. He started his career in the industry in 1999 at APG, where he held several positions including Portfolio Manager of a global insurance portfolio and subsequently a pan-European financials portfolio. Jan Willem holds a Master’s in Business Economics from the University of Groningen and he is a CFA® charterholder. The Robeco Financial Institutions Bonds fund is managed within Robeco’s credit team, which consists of nine portfolio managers and twenty-three credit analysts (of which four financials 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 dedicated quantitative researchers and 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.

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 0.05% 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.

The fiscal consequences of investing in this fund depend on the investor's personal situation. For private investors in the Netherlands real interest and dividend income or capital gains received on their investments are not relevant for tax purposes. Each year investors pay income tax on the value of their net assets as at 1 January if and inasmuch as such net assets exceed the investor’s tax-free allowance. Any amount invested in the fund forms part of the investor's net assets. Private investors who are resident outside the Netherlands will not be taxed in the Netherlands on their investments in the fund. However, such investors may be taxed in their country of residence on any income from an investment in this fund based on the applicable national fiscal laws. Other fiscal rules apply to legal entities or professional investors. We advise 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 fund incorporates sustainability in the investment process via exclusions, ESG integration, a minimum allocation to ESG-labeled bonds, 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. Furthermore, the fund invests at least 5% in green, social, sustainable, and/or sustainability-linked bonds. Lastly, where issuers are flagged for breaching international standards in the ongoing monitoring, the issuer will become subject to engagement.The following sections display the ESG-metrics for this fund along with short descriptions. For more information please visit the sustainability-related disclosures.The index used for all sustainability visuals is based on Bloomberg Euro Aggregate Corporates Financials Subordinated 2% Issuer Cap.

The US elections were the main event in November, with Donald Trump securing the presidency and the Republican party taking control of both chambers of Congress – a so-called ‘clean sweep'. This result was warmly received by US risk markets, with the S&P 500 gaining close to 6% for the month. The returns for risk assets outside the US was considerably more mixed. German Bunds outperformed in the European government bond market, as weak data supported the case for deeper ECB rate cuts. French government bonds widened, as concerns emerged over the budget and potential collapse of the government. European swap spreads also widened a bit in the second half of the month and the divergence between credit markets was notable in spreads, with US IG spreads tightening, while European IG spreads widened. There was quite some new bond issuance during the month and we were selective in picking the deals in which we wanted to participate. Bonds that we liked were the new Tier-1 CoCos of RBI Bank, Deutsche Bank and the Dutch insurance company Athora. With these new deals, the exposure that we hold in CoCos has risen from 12% to 13%.

Based on transaction prices, the fund's return was 1.47%. The positive return was driven by a decline in underlying government bond yields; credit spreads initially tightened but widened in the second half of the month. The average index spread ended the month at 171 basis points, the same level as at the end of October. The index excess return of subordinated bonds over underlying government bonds was positive, at 0.27%. The performance of the underlying portfolio, measured gross of fees, was lower than that of the index. The beta overweight position contributed positively, while issuer selection contributed negatively. The most important driver for negative issuer selection was the underweight that we hold in real estate companies Aroundtown and Grand City. Corporate hybrids of these two issuers continued to perform well. We did participate in a new bond issue of Heimstaden, a real estate company that we like much better. We also acquired existing bonds of this issuer in the secondary market. The positions in Heimstaden contributed positively in November. Another positive contributor was the National Bank of Greece, as Greek banks continue to perform very well.

Credit spreads for European bank and insurance companies are still relatively attractive, especially when compared to the US credit market or the high yield market. At the same time, the financial sector is doing very well. Balance sheets look robust after years of deleveraging and cyclically, the sector is benefiting from higher interest rates. Going forward, we do not expect a further improvement in bank profitability, as short-term interest rates have peaked and will gradually go down again. As it is unlikely that we will move back to a negative interest rate environment, we expect profitability to remain healthy. Appetite for bonds with higher yields is still strong, as investors like to lock in current attractive yield levels. In the last weeks, a large number of bank CoCos has been issued and order books for those deals were again large. As spreads have tightened significantly in the past year, we are becoming more selective in participating in new bond issues. We continue to target an overweight beta positioning in the fund, as we see plenty of opportunities to buy bonds at attractive levels, in primary or secondary markets.