After years of stability, the return of volatility to global markets in February 2018 saw those shorting it suffer substantial drawdowns. This led many investors to question the appropriateness of such a strategy. NN Investment Partners (NN IP) demonstrates the continued attraction of systematically selling volatility, regardless of the prevailing level of volatility, with expected returns exceeding losses over the long term.
The historical risk-return profile of Emerging Market Debt (EMD) compares favourably with its developed market counterparts: investors willing to tolerate the inherent volatility have been rewarded with higher returns over the longer term, thanks to a compelling risk premium.
The higher yields and potential for currency appreciation means that Emerging Markets Debt (EMD) now offers one of the most exciting asset classes in the world. As such, the asset class deserves greater consideration. Yet NN Investment Partners’ (NN IP) ‘Investor Sentiment: Emerging Markets Debt research’ reveals the low exposure to the asset class still held in portfolios.
Emerging countries and their capital markets have continued to develop rapidly since the 1990s, when the Brady Plan created a universe of liquid and investible hard currency instruments that now offer a compelling and deep range of sub-asset classes. Expectations for these capital markets are strong: the ‘Investor Sentiment: Emerging Markets Debt’ research commissioned by NN Investment Partners (NN IP) shows that three out of four (75%) professional investors expect fundamental economic drivers in the Emerging Market Debt (EMD) sector will improve over the next two to three years, including nearly a fifth (18%) who expect a significant improvement.
• Increasing scarcity of high return assets and political risks are the two biggest concerns highlighted by institutional investors, and this will fuel demand for alternative credit
• The ability to offer higher absolute risk-adjusted returns is seen as the main benefit of alternative credit
• Senior Bank Loans, Infrastructure Debt/Project Finance and Commercial Real Estate Loans are identified as the two most attractive forms of alternative credit
• 37% of institutional investors are set to increase their exposure to alternative credit if interest rates continue to rise
• 14% of investors are set to invest in the asset class for the first time this year
• Key obstacles to investing in alternative credit include understanding the risk profile, and a lack of relevant data and information
The Netherlands is the first country stating specifically it wants to phase out natural gas. Similar action will ultimately be seen in other European countries as well. A look at the new Dutch government’s energy transition plans.
Two billion people around the globe do not have access to the services of the financial sector. NN IP’s global equity impact strategy invests in companies that are helping to unlock this social and economic potential.
Through its investments, NN Investment Partners is exposed to palm oil. We believe we can use our influence to improve the standards in the sector. We therefore have developed an engagement strategy with the companies in the industry in order to improve on the environmental and social aspects.