News & Commentary
• Initiatives by governments and stakeholders to reduce the harmful use of alcohol are essential steps to build a more sustainable world • NN Investment Partners believes that engaging with alcohol producers is a better approach than excluding them from portfolios and therefore developed objectives on responsible drinking marketing, human rights, carbon footprint and water scarcity • ‘Premiumisation trend’ gives beverage producers significant opportunity to improve profitability
• NN Investment Partners (NN IP) sees investment in sanitation as an opportunity for investors to make a positive impact while achieving attractive returns • NN IP invests in companies with strong innovative business models that offer transformational solutions for societal challenges
• US to face moderate growth slowdown as stimulus effect wanes and Fed tightening is starting to be felt • Economic growth in Europe and Japan is starting to re-converge to US growth in 2019 • As growth in developed markets converges, we prefer emerging markets and European assets to US • Emerging markets face challenges from trade tariffs and normalising US monetary policy • Individual investors expect global growth to decelerate, according to a poll by NN Investment Partners • NN Investment Partners prefers credit risk instead of duration as monetary policy slowly returns to normal
• The Oil & Gas sector is particularly exposed to associated risks of climate change • NN IP focuses on the sector to encourage transparency about activities and risks
• Including measures of engagement and intentionality would enhance ‘Impact’ gauges • Improved reporting and transparency, the rise of more data sources and the standardisation of measurement methodologies will spur progress
If we look past negative headlines regarding tariffs and trade wars, the world is currently seeing healthy economic growth and upward pressure on interest rates due to the phasing out of monetary stimulus. Such an environment presents a buying opportunity for Convertible Bonds (CBs). CBs’ equity-like characteristics mean they benefit from economic growth while they are only modestly impacted by rising rates because of their low duration, which averages 1.8 years across the asset class.
• Economic slowdown: does it present headwinds for value investing? • Targeting sustainable dividends is key to outperforming the market
Turkey’s economic problems and escalating tensions with the United States have dominated the headlines in recent days, causing a spike in risk aversion among investors globally and knocking confidence in emerging market (EM) assets. In the middle of this turmoil, NN Investment Partners (NN IP) has reduced its equity exposure to neutral. The Multi Asset team has also identified other factors than the Turkey crisis that may weigh on equity markets going forward, including a fading support from earnings momentum, weak sentiment, flow and technical indicators and other geopolitical risk factors like trade policy and the Italian budget discussion.
• The recent market correction was associated with increased value in Frontier Markets Debt (FMD) while the fundamentals remain strong. • In the very short term, NN Investment Partner (NN IP) remains cautious given headline risks and the prospect of a more challenging technical backdrop towards year-end. • After a strong snap back we continue to look for positive FMD returns on a six to twelve month horizon, with clear potential for strong idiosyncratic investment cases, in particular in some African states such as Ghana and Egypt.
Improving market dynamics, including better investor sentiment, low positioning and positive price momentum, means the chances of a major equities correction of 10%-plus are low. The likelihood is lessened further by strong corporate fundamentals, as demonstrated by one of the best US earnings seasons in Q2 of the past years; good macro data pointing to consolidation at a healthy level; gradual and predictable central bank policies; and the start of targeted Chinese easing to counter the growth slowdown and negative trade impact.