Morningstar

Robeco QI Emerging Cnsrv Eqs D €

Analyst Report
Morningstar's Take
|08/01/2024
by Francesco Paganelli
In a surprise announcement, Robeco's CIO of fixed income and sustainability Victor Verberk left the asset manager on 5 June 2023 to pursue other opportunities. Verberk joined Robeco in 2008 as head of investment-grade credit and co-head, along with Sander Bus, of the credit portfolio management team. He was promoted to CIO of fixed income and sustainability in 2020 and was a member of Robeco's executive committee since 2017. At the time of his departure, he was also a named portfolio manager on the Robeco Global Credits, Robeco Euro Credits, and RobecoSAM SDG Credit Income strategies.

Going forward, Mark van der Kroft, who has been CIO of fundamental and quant equity since September 2020, will add the fixed-income and sustainability CIO responsibilities to his plate as the firm moves forward with only one CIO.

At this stage, we are making no changes to our Parent Pillar rating of Above Average as a result of the leadership change.

 
Robeco QI Emerging Conservative Equities adopts a repeatable, disciplined, and well-conceived approach to harvest the low-volatility factor. Its process is rooted in empirical research and is consistently enhanced by a large, experienced, and stable outfit of talented specialists in systematic investing.

Robeco's quantitative-based conservative equities range is managed by a six-member team led by Pim van Vliet, whose academic work has laid the conceptual foundation of the strategy's investment philosophy. This stable and experienced management team is well-supported by more than a dozen quant analysts, headed by David Blitz and Weili Zhou, who are dedicated to research and development. This credentialed unit is vital to the fund's success as it constantly refines the systematic process employed across the firm’s conservative range. All in all, Robeco's broader quant team is one of the best-equipped organizations in the systematic field; over time, it has successfully groomed young quant researchers in its talent pool, allowing them to add people with complementary skills to the teams. The group continued to expand in 2022 with a few experienced hires, further strengthening and expanding its capabilities.

The strategy's key attractions include its academic foundation, repeatability, and disciplined execution. The rules-based, systematic process is centered around a proprietary stock-selection model that itself is built on empirical research demonstrating that investing in low-risk stocks leads to superior risk-adjusted returns. The strategy goes beyond traditional low-volatility investing, though, by combining value, quality, sentiment, and momentum signals to enhance the overall risk/reward profile. The team aims to own the highest-ranked stocks and keep portfolio turnover to a minimum, whereas portfolio construction is driven by an optimization algorithm to ensure sufficient diversification. The group's continuous efforts in researching and developing new signals and systems have resulted in several incremental enhancements to the model over the years. The team strikes a balance between a straightforward factor implementation and the addition of complementary signals to improve the funds' alpha potential, but the process has many moving parts, which increases overall complexity to some extent.

The strategy ultimately aims to win by not losing. It has been able to reduce risk as expected, though its results versus the MSCI Emerging Markets Minimum Volatility Index have been less consistent. The strategy's weak 2020 results were disappointing, but that wasn't unique among peers with a similar risk factor profile, even if it illustrates the strategy’s vulnerability to sharp factor reversals. That said, in our view the strategy's long-term alpha potential remains intact, as evidenced by its strong comeback in recent years. Overall, the fund remains a sound and reliable option in this space.
 
Morningstar Medalist Rating™A strong option for investors seeking a more defensive play on emerging-markets equity.
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Morningstar Pillars
PeopleHigh
ParentAbove Average
ProcessAbove Average
 
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