Valentijn van Nieuwenhuijzen on what investors can learn from the COVID-19 crisis
Ahead of the Virtual Edition of the Sustainable Investment Forum Europe 2020, a 4-Part Digital Event Series starting from 8 September, we caught up with Valentijn van Nieuwenhuijzen, Chief Investment Officer at NN Investment Partners, to discuss what investors can learn from the COVID-19 crisis.
Ahead of the Virtual Edition of the Sustainable Investment Forum Europe 2020, a 4-Part Digital Event Series starting from 8 September, we caught up with Valentijn van Nieuwenhuijzen, Chief Investment Officer at NN Investment Partners, to discuss what investors can learn from the COVID-19 crisis.
What can investors learn from the Covid-19 crisis?
That the world is changing faster than ever, and that uncertainty will never go away. If anything it might be increasing. One key characteristic investors must possess in order to serve their clients well and “survive” in this newly emerging environment, is adaptability. They need to embrace transformation and disruption and build a culture that fosters innovation and integrates sustainability and digitization into their investment approach.
This means that a rigorous and in-depth fundamental analysis of macroeconomic or corporate financial factors needs to be enriched with more high frequency (alternative) data. Investors also need to explore far more non-financial factors like ESG to the fullest possible extent. Part of this process involves utilizing more digital data analytics, like machine learning or natural language processing, to achieve both a broader scope of critical information and a faster speed of insight to enhance adaptability in times of disruption (like the Covid-19 crisis).
Are investor trends shifting away from lower risk asset classes to seek higher risk returns? What are you views on short termism versus long termism?
In the early stage of the crisis (March 2020), a lot of investors moved into lower-risk assets in search of safety. However, that did not last very long and enormous policy support gave them the confidence that significant high-risk investment opportunities were emerging. This is reflected in the massive rally in equity and credit markets since April 2020, despite the fact that there was also a record amount of new issuance in the corporate bond markets, which was surprisingly easily absorbed.
It also illustrates that there are multiple dimensions to the short-term/long-term trade-off. Although both business and investment strategies should always be built on stable principles and longer-term objectives, we should never forget the basic principles of evolution. As Darwin put it so elegantly “it is not the strongest, but the most adaptable that survive”. Covid-19 also teaches us that short-term adaptability is key for long-term survival and both business models and investment approaches actually become more robust if this is taken into account.
How have your clients adapted to the recent shocks in financial markets? Is full transparency and insight for clients critical for success?
During the recent Covid-19 crisis there have obviously been times of stress for some of our clients, but generally they have responded very calmly and in a balanced way. An important aspect has been their willingness to stay calm and our ability to provide speedy updates in the context of what is emerging for the economy, markets and client portfolios. Transparency on what is happening combined with a proactive approach, easy accessibility and open dialogue have contributed significantly in guiding clients in the right way and supporting them in balancing their thoughts.
Client interest in our ESG-integrated and Sustainable strategies has also increased significantly and these have performed very well during the first half of the year (following strong preceding years as well).
Has NN IP adapted and developed a particular investment style in response to the crisis?
NN IP has not changed its investment approach. It has been and remains our mission to deliver investment excellence in a responsible and adaptable manner. The expertise, investment approach and culture that we have built to steer our mission have helped us to effectively navigate our way through the Covid-19 crisis. This is evident in our investment performance, our improving peer rankings and rising interest in our capabilities, especially in sustainable strategies, multi asset, credits, emerging market debt and private debt.
Will adopting ESG and sustainable strategies be a prerequisite for clients going forward?
This does still differ across regions globally, but in some areas it is already the case, in a large part of Europe, for example. In other areas like the UK, Southern Europe, most of Asia and Latin America, we are rapidly moving in that direction. Things might move more slowly in the US and maybe in private markets, but as ESG integration is now also increasingly associated with better investment results, I would not be surprised to also see it accelerating in those areas.
Valentijn van Nieuwenhuijzen will be sharing further insights at the Virtual Edition of the Sustainable Investment Forum Europe 2020, organised in Partnership with UNEP-FI. The 4-Part Digital Event Series will take place on the 8th, 11th, 15th and 22nd September 2020. Secure your place today by registering for free here.
