All material subject to strictly enforced copyright laws. © 2022 Euromoney Institutional Investor PLC group

Dutch Investor May Sell Insurance Debt

Robeco is looking to scale back its investments in the subordinated debt of European insurance companies.

Klaas Smits

Robeco is looking to scale back its investments in the subordinated debt of European insurance companies. Klaas Smits, head of credit investments and manager of the E1 billion Robeco Credit Fund in Rotterdam, said he may reduce the fund's massive overweight to financials by selling insurers. The fund holds 50% of assets in financials, versus the sector's 18% weighting in the fund's benchmark, the Lehman Brothers Euro Aggregate Index ex-Treasuries. Smits has a 3-4% overweight in European insurance company debt based purely on technicals and said he is looking to bring this back to neutral if he sees broad-based equity markets drop by more than 5% on average. He has no plans to alter the fund's 15% overweight in subordinated bank debt, which is based on the solid fundamentals of the companies.

In particular, Smits said he would reduce the fund's overweight to Allianz 5 1/2% notes of '49 if he sees conditions deteriorating relative to the most likely scenario of 2% short-term interest rates and 4% economic growth in the U.S. He would start scaling back if the Treasury curve flattens significantly or if there is an upswing in debt-funded merger and acquisition activity, as this would diminish the technical attractiveness of the bonds, which he is already negative on fundamentally.

In the meantime, the fund continues to range trade U.S. automakers, where it is also overweight. Recently, the fund bought GMAC 8 3/8% notes of '33 at 260 basis points over and sold them at 230 over.

Robeco has E41 billion in fixed income overall.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree