News & Commentary
Emerging Market Debt (EMD) denominated in local currencies and Frontier Market Debt (FMD) offer investors some of the strongest opportunities to balance their fixed income portfolios against the potential headwinds arising from monetary policies normalising and interest rates rising globally.
Fixed income investors should look to Corporate High Yield bonds, Emerging Market Debt (EMD) and Alternative Credit as potential solutions to counter rising interest rates when Western governments normalise their monetary policies.
Global economic growth in recent years has been fairly stable at a level clearly below that of expansion periods before the global financial crisis, when both nominal and real growth were substantially higher on average. Today, growth is better-positioned to break out on the upside than at any time since the crisis, but whether this will happen is far from certain, and will mainly depend on productivity growth and geopolitical tensions.
NN Investment Partner’s (NN IP) NN (L) Global Convertible Opportunities fund (GCO) surpassed the $ 1 billion mark last month. This milestone underlines that investors increasingly use convertible bonds (CBs) as a vehicle of choice at a time when global central banks are looking to reduce their stimulus measures. Going forward, rising rates may also give CB issuance a boost as corporates tap this market to continue to finance themselves at attractive rates.
With the European Central Bank preparing to wind down its supportive monetary policies, we should expect a reshuffling of the best-performing European equities.
The pick-up in global trade, which is partly the result of good growth dynamics in China, is having a positive impact on emerging markets (EMs). NN Investment Partners’ (NN IP) own proprietary indicators show that EMs continue to strengthen.
Freshwater scarcity poses one of the world’s biggest social challenges. Global demand for freshwater is expected to almost double over the next 15 years. The financial market for solutions to this expected water crisis is worth US $500 billion and growing at 4.5%-5% per annum. This already offers investors excellent opportunities to generate both financial returns and social impact, for example by investing in shares of companies with smart solutions to this water problem.
Green bonds are emerging rapidly as a new category within fixed income. The market has been growing impressively over the past few years and keeps on broadening in terms of countries, currencies, sectors and seniority/ranking. We think that the green bond market has reached a point at which the barrier for investors to make an allocation to green bonds is relatively low. There are different ways of implementing green bonds in your investment portfolio. Some investors include green bonds in their existing portfolios, for example buying some green bonds in a normal or regular credit portfolio. Recently more investors are allocating a separate part of their assets to a portfolio which exclusively holds and buys green bonds.
NN Investment Partners (NN IP) has received the top score for its excellent Strategy & Governance approach to responsible investing and ESG integration. The A+ score was awarded by the Principles for Responsible Investment (PRI), marking NN IP’s progress from an A score in 2016. NN IP has been a signatory of the United Nations-supported PRI since 2008, and has been active in responsible investing since 1999.
• NN (L) First Class Multi Asset Premium (FCMA Premium) is managed by NN Investment Partner’s (NN IP) • The fund combines in-depth fundamental analysis of economic trends with extensive behavioural analysis on the psychology of the market and behaviour of other investors • Changing monetary policies and a challenging political environment asks for flexible investment strategies with a clearly defined risk framework