Morningstar

Robeco Global Consumer Trends Eqs I €

Analyst Report
Morningstar's Take
|02/04/2024
by Jeffrey Schumacher
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 Global Consumer Trends Equities continues to benefit from talented portfolio managers and a proven investment process. We retain the Above Average People and Process ratings.

Our confidence in the portfolio managers at the helm remains high. Jack Neele and Richard Speetjens, who boast a collective track record of more than a decade on the strategy, have demonstrated their ability to analyze consumer-driven trends and their impact on business models and the competitive landscape. They show deep insights in the portfolio's holdings but also provide solid rationales for those that don’t make it in their thematic-driven portfolio. The duo collaborates closely with two dedicated analysts and leverage wider firm resources. While the team is adequately staffed, it remains compact and short on tenure versus category peers. We also note that the wider team has experienced turnover in recent years.

The managers invest along three major trends: the digital transformation of consumption, the emerging middle class, and health and well-being. This blend of themes reduces overall portfolio risk. The managers have refined their approach over the years, leading to a conviction-based but diversified portfolio. After reflecting on the underperformance of 2021, the managers decided to emphasize their highest convictions, leading to a more concentrated portfolio focused on more established growth companies and a reduction in exposure to smaller and more speculative growth companies. While understandable, the decision may limit the managers' ability to generate alpha from a market segment that has contributed positively to the strategy's long-term performance.

The managers have been actively reducing their direct exposure to China (12% of the portfolio in 2021) as growing concerns about the Chinese consumer offset the appealing valuations. After selling Meituan and Tencent in 2022, Alibaba left the portfolio in December 2023, taking China exposure down to under 1% per the end of February 2024, with PDD being the only remaining position. Instead, the managers see better opportunities in India (Asian Paints) and Brazil (Nu Holdings, MercadoLibre). A slowdown and pricing pressure for electronic vehicles prompted the managers to sell Tesla and Mercedes-Benz, though Ferrari remains a favorite within the automobile sector.

Under Neele and Speetjens, the fund has built a strong record since inception, as the duo generated a positive alpha versus the Morningstar Global Growth TME category index. However, dismal performance in 2021 and 2022 has damaged the fund’s track record over shorter time periods. Rising interest rates, persistent inflation, and geopolitical tensions sent stocks into a tailspin in 2022, with growth stocks suffering from price multiples contraction, putting the strategy's valuation risk at full display. Some lost ground was recouped in 2023, when especially the stocks in the digital transformation of consumption bucket performed well.
 
Morningstar Medalist Rating™A solid thematic approach.
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Morningstar Pillars
PeopleAbove Average
ParentAbove Average
ProcessAbove Average
 
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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