Defensive Equities

Our defensive investing strategy encompasses Conservative Equities and builds on the low-risk anomaly identified in the asset pricing literature, which demonstrates that low-risk securities tend to produce higher risk-adjusted returns than their high-risk counterparts.¹ This strategy is driven by a proprietary stock-ranking process with a strong track record that combines multiple dimensions of risk for robust downside protection and includes return factors for enhanced upside potential. This approach identifies the most attractive defensive companies.

Defensive investing is designed for steady capital growth with a focus on preserving capital, diversifying portfolios, and generating reliable dividend income. Robeco's Conservative Equities strategy is our answer to this approach², standing out by blending backward-looking risk measures and forward-looking distress indicators³.

Additionally, the strategy integrates a broad range of return variables. As such, it targets sustainable income through the use of value and quality variables and captures positive sentiment with momentum and analyst revisions variables. This helps to increase its up-capture potential in rising markets and enhances long-term returns.

The Conservative Equities strategy selects the most attractive defensive stocks based on expected risk and return, while taking transaction costs into account and exploiting short-term alpha signals to optimize trading. In order to ensure sufficient diversification, strict concentration limits are applied at country, sector and stock level.

Unlike passive indices, client cash flows are actively used to optimize portfolios using the latest alpha signals while avoiding unnecessary portfolio turnover, reducing costs and enhancing net returns.

The quant group consists of more than 50 quantitative researchers and portfolio managers, making it one of the largest quantitative teams in the world. We combine this breadth of quant disciplines with over 25 years’ experience of translating our quant research into innovative solutions.

Robeco’s defensive strategy is run by an experienced group of portfolio managers within an organization that is fully committed to quantitative investing. The portfolio managers collaborate strongly with and benefit from the expertise of Robeco’s researchers in managing the strategy.

The quantitative researchers are responsible for the development and enhancement of models and applications, which form the heart of our quantitative equity strategies. The experienced research team has strong academic links.

Conservative Equities is offered for the global developed and global all-country regions as well as Emerging Markets, Europe, US and China-A shares⁴.

This strategy promotes, among other characteristics, environmental and/or social characteristics, which can include exclusionary screening, ESG integration, ESG risk monitoring and active ownership. It is classified as Article 8 under the EU Sustainable Finance Disclosure Regulation.

We incorporate sustainability in the investment process in multiple ways:

• Companies with potentially harmful business practices or products are precluded from the investable universe in line with the Robeco exclusion policy.

• The portfolio is constructed so that it has higher exposure to companies that contribute positively to the SDGs than the market.

• The portfolio is built so that it reflects a lower ESG risk profile and environmental footprint (carbon, waste and water) compared to the market.

• Voting and engagement duties are carried out on behalf of clients and a direct link between the enhanced engagement program and the portfolio is applied.
  
  

Robeco also offers an SDG & Climate Conservative Equities strategy. This sustainable Article 9 strategy is Paris-aligned with a 50% lower carbon footprint and has a significantly better ESG and SDG profile than the market index.

Footnotes

¹ Low Volatility defies the basic finance principles of risk and reward
² The introductory guide to Conservative Investing
³ Forecasting stock crash risk with machine learning
⁴ The Low Volatility effect in China