EM, Nordic high yield, sustainability, value investing in focus at NIMF3

Investors in Luxembourg have heard presentations on emerging markets, Nordic yigh yield, sustainability and value investing – as well as connections between Luxembourg and the Nordic region in terms of industry assets – at the third annual Nordic Investment Managers Forum.

The Forum, which took place on 6 October at the Cercle Cité included Camille Thommes, director general at Alfi, the Association of the Luxembourg Fund Industry, Antti Raappana of Danske Invest, Svein Aage Aanes of DNB, Louise Hedberg of East Capital, and Jens Moestrup Rasmussen of Sparinvest – all well-known Nordic asset managers.

The event was moderated by Jonathan Boyd, editorial director at Open Door Media Publishing; with some 100 investment professionals in attendence this was the third year in a row of growing audience participation. Attendees saw both individual presentationsa and a panel discussion on the topic of active versus passive management.


Antti Raappana, chief portfolio manager, head of Global Emerging Markets Solutions at Danske Invest, outlined the transformation of the emerging markets asset class. In particular, he highlighted the changes affecting China and what this means for investors both inside the country and externally.

A key change noted across EM more generally is that the drivers of individual markets are increasingly different, Raappana said: “Now I would argue, that international investors view EM in more realistic and constructive way, which has led to revival of fund flows.”

Svein Aage Aanes, DNB’s head of Fixed Income, picked an asset class closer to home in his overview of opportunities in Nordic high yield assets. Currently a market valued at about €34bn, and chiefly made up of Norwegian and Swedish securities, he argued that it offers investors access to a BB- rated universe with relatively low interest rate sensitivity.

Aanes added: “The oil service sector is down and out of the issuance markets, but we do not believe that the oil price presents much of a downside risk from here.”

Louise Hedberg, head of Corporate Governance at East Capital, tackled the issue of sustainability, which has been framed as the biggest challenge facing investors and others.

Hedberg outlined ongoing changes such as China’s “war” against pollution and how this is leading to opportunities in the country’s cleantech market. At East Capital, the approach is to integrate analysis and assessment of corporate governance standards in the investment process, especially where the the local regulatory framework is not clear or developed.

“Experience shows, that companies that understand and appreciate the purpose of good corporate governance are more often well-managed in every sense. Relevant and material environmental and social factors can significantly impact the financial value and future position of a company,” she said.

Jens Moestrup Rasmussen, chief portfolio manager at Sparinvest, talked about value investing, presenting an argument that the perceived underperformance of value investing.

“People claimed the death of value investing in the early 1970s, the late 1980s, the late 1990s and most years since the financial crisis. But people tend to overlook the fact, that research shows, that value investing is an efficient way to outperform the market over longer time horizons.”

Another thought that Rasmussen left the audience with is that periods of underperformance by value investing do end, and that they can end abruptly. Consideration should therefore be given to reviewing equity exposure and rotating into this category

“Buying cheap assets remains a solid long term investment strategy . Rising interest rates could be a catalyst for a value rebound.”

Panel discussion

Raappana, Aanes, Hedberg and Rasmussen took part in a panel discussion that focused on the respective merits of active versus passive investments.

Interestingly, as a group of active managers themselves, they did not dismiss out of hand the role or place of passive investments in a portfolio – as long as the investor fully understands why they may be picking a passive fund instead of an active one.

Both Raappana and Hedberg, who were presenting on emerging markets-related content, noted that there are still many areas of EM investing where it is simply not possible to pursue efficient investing via a passive vehicle. For example, the long term implications are unknown of MSCI adding a bigger China weighting to its ubiquitous emerging markets benchmark index. And investors who may have had a large exposure to a company like Samsung by virtue of its weight in broader EM indices will recently have seen how that can affect portfolio performance.

From a fixed income perspective, particularly in regards to Nordic assets, Aanes noted that the debate is a different one. However, he too suggested that investors should always be open-minded to the opportunities in front of them.

Rasmussen brought another angle to the debate: he was instrumental in bringing the first passive funds to the Danish market, among the various roles he has had in the industry in the past. From his perspective, there is definitely a role for both active and passive funds.

Collectively, the speakers also noted that given the ongoing growth in net inflows to passive investments, it is clear that if the active management industry is to respond, it may need to “up its game”. One area may be improved transparency, but also in terms of communicating with investors excactly what it is that is being done by portfolio managers to add value. This suggests that there may be further activity in future around identifying so-called closet trackers, who may be charging active management level fees but only providing a benchmark hugging process.

Further information on the event and the presentations can be found at www.nimf.lu


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