News & Commentary
• Infrastructure assets can be attractive for investors while delivering economic and social benefits • The NN (L) European Sustainable Infrastructure Debt fund addresses growing investor demand for high quality infrastructure debt investments with robust and predictable cash flows generated from assets that contribute to a more sustainable future
• 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
• NN IP now has EUR 32 billion in assets under management in the Euro Credit asset class • NN IP is a pioneer in expanding the euro credit funds range with sustainable products • NN IP sees rising investor demand in sustainable credit products
• Research by the Sloan School of Management at Massachusetts Institute of Technology (MIT) shows that an optimal allocation to Emerging Markets Debt (EMD) is between 8%-35% of fixed income portfolio in rising rate environment • EMD still accounts for a weighting of 2%-6% in global bond benchmarks despite benefits • High yield, hard currency debt offers best potential in this context
The green bond market has seen a rapid expansion, with new issuance in 2017 reaching EUR 112bn, up from EUR 73bn in 2016, driven by improving guidelines and taxonomies, strong political support and a sharp rise in investor demand. Alongside this growth, the market has been extended with new impact investing products in the form of social and sustainability bonds that commit to social prosperity as well as environmental welfare. The key differentiator of these products is their use of proceeds, with social bonds used to finance new or existing social welfare investments, and sustainability bonds providing a combination of green and social benefits. Such products are beneficial to all stakeholders, providing an innovative financing model for issuers, boosting transparency in the market and contributing to society as a whole through ameliorating environmental and social welfare.
Brazil’s elections come at a difficult moment, with the presidential candidates under heavy market pressure to come up with a credible plan to reduce the fiscal gap. If the next president, to be elected in October, has no credible plan to control social security spending, financial markets are likely to sell off sharply, pushing the real lower, interest rates higher and putting increased pressure on the new Brazilian leadership to act. Maarten-Jan Bakkum, Senior Emerging Markets Strategist at NN Investment Partners explains: