Portfolio Manager
• Insight
Five reasons to invest in SDG Credit Income
We highlight five reasons for investing in the Robeco SDG Credit Income strategy.
Authors
Top keywords
Summary
- An attractive risk-return profile compared with high yield market
- Exposure to global markets, with tactical flexibility through the cycle
- SDG focus improves investor’s sustainability profile and lowers risk
SDG Credit Income has a track record of delivering high-yield-like returns in a bull market environment, and of producing lower drawdowns than a dedicated high yield strategy in a bear market environment.
The emphasis on higher-quality BB/BBB credits, investments in shorter-dated credits and tactical use of treasury exposure, have resulted in a better risk profile than high yield, while the large investment opportunity set has enabled the strategy to provide returns in line with the high yield market.
The strategy aims to deliver a USD yield of 4-6% through the cycle. The current portfolio yield still represents an attractive yield pickup compared to zero or negative-yielding cash or government bonds.
2. Exposure to best-in-class credit investments across investment grade, high yield and emerging markets, through the cycle
The strategy has access to the full spectrum of global credit opportunities. This is combined with tactical adjustments for each market phase, to underpin performance.
Robeco’s credit team has a very strong track record in investing in global high yield, global investment grade credit and emerging credit markets.
The SDG Credit Income strategy invests in the best-in-class credit ideas across global investment grade, high yield and emerging markets, based on superior bottom-up fundamental research and more than a decade of experience in identifying the best investment opportunities in global credit markets throughout the credit cycle.
3. Low volatility compared to high yield and emerging credit
Strategic and tactical management of portfolio risks ensures that the strategy has a low volatility profile – typically around 2-6% – compared to traditional high yield and emerging market investments.
Several factors contribute to the low volatility profile of the strategy. The portfolio is diversified across different markets and investment themes, which is an important tool for managing volatility. The portfolio construction also entails an emphasis on shorter-dated credit, which is less sensitive to market volatility than the longer-dated end of the market spectrum. Moreover, the tactical use of treasuries can be a very effective hedge against credit market volatility.
4. Sustainability screening lowers downside risk and enhances returns
Our proprietary sustainability screening process, which is based on the UN Sustainable Development Goals (SDGs), contributes to our ability to avoid poorly performing names. This has been a significant contributor to performance, particularly in times of market stress.
One of the mantras in our investment philosophy is ‘Winning by not losing’. In credit investing, avoiding poor performance is often more important than picking one high-performing name. We apply our proprietary SDG methodology to screen out companies that negatively impact the UN Sustainable Development Goals. The SDG screening process has been an important factor in our ability to avoid poorly performing names.
5. Improves sustainability profile of your fixed income portfolio
The SDG Credit Income strategy, which incorporates rigorous screening of credits based on their contribution to the SDGs, enables fixed income investors to improve the sustainability profile of their portfolio.
The strategy primarily invests in companies that make a positive contribution to the UN SDGs. This approach is critical to our ability to avoid investing in companies with outmoded business models that have come under severe pressure.
Examples of such outdated and unsustainable business models include automotive companies that do not adapt quickly enough to a world of electric vehicles, and traditional integrated oil producers. By contrast, companies that offer solutions to help achieve the SDGs may well be the winners of the future – as well as attractive investment candidates.
Important information
THIS WEBSITE IS SOLELY INTENDED FOR PROFESSIONAL INVESTORS, WHICH HAS THE MEANING ASCRIBED TO IT IN THE SECURITIES AND FUTURES ORDINANCE (CAP. 571 OF THE LAWS OF HONG KONG) AND ITS SUBSIDIARY LEGISLATION. Investment involves risks. Past performance is not indicative of future performance. The information contained in this website is provided for reference only and does not constitute investment advice or an offer or solicitation to buy or sell in any securities or to adopt any investment strategy. Investors should not base their investment decisions solely on the information provided on this website and are advised to seek independent advice (including advice on tax implications) before making any investment decisions. Investors should ensure they fully understand the risks associated with the investment products and should also consider their own investment objectives and risk tolerance level. The investment decision is yours. You should not invest unless the intermediary who sells you the investment products has advised you that it is suitable for you and has explained how it is consistent with your investment objectives. Please refer to the relevant offering documents or other legal documents for further details including the risk factors. This website is published by Robeco Hong Kong Limited which is regulated by the Hong Kong Securities and Futures Commission (“SFC”) (CE No. APU851). This website has not been reviewed by the SFC. No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of investments may fluctuate. Past performance, projections, or forecasts included in this website should not be regarded as guarantees or indications of future performance, and no express or implied warranty is provided. The contents of this website are based on sources believed to be reliable, but due to the nature of information delivery technology and the necessity of using multiple data sources, including third party content, their accuracy is not guaranteed. The opinions expressed are as of the date shown above and may change as market conditions evolve, and are subject to change without notice. These opinions may differ from those of other Robeco investment professionals. Robeco accepts no liability for any direct, indirect, or consequential loss arising from the use of this material or any comments, opinions, or estimates contained herein. Robeco has no duty to update this website or any website content. Materials on this website may not be reproduced, distributed, or published without prior written permission from Robeco. Unless otherwise specified, Source: Robeco.
