Charles Beazley is Europe president at Nikko Asset Management in London. Headquartered in Tokyo, Nikko AM employs 550 people worldwide and globally manages $109 billion, as at 31 December.
The firm recently launched a Ucits-compliant version of its World Bank Green Bond Fund for European and Middle Eastern investors and may market the product in Asia ex-Japan.
AsianInvestor spoke to Beazley about his investment outlook for the coming months and how Europe's sovereign-debt problems are affecting the firm's strategy.
What investments, sectors, regions, and asset classes does Nikko AM find attractive at the moment, and why?
Strategically, we continue to believe emerging-market debt markets continue to offer good long-term value, especially vis a vis developed government bond markets. We believe investors should look to diversify away from their focus on developed government bond markets due to the changing composition of global GDP and because many G7 countries have an inferior debt-to-GDP ratio compared to their EM counterparts.
For this reason, our new green fund [the Nikko World Bank Green Bond Fund] has a structurally higher weighting to EM currencies compared to most conventional bond funds.
What investments are Nikko AM avoiding, and why?
Nikko AM Europe's fixed-income team is placing a greater emphasis on those currencies that will benefit from the change in the world economic order now taking place. This includes a greater emphasis on EM and high-yielding commodity currencies. Rather than avoiding specific asset categories, this approach emphasises the need to diversify away from developed fixed-income markets, more towards emerging FI markets.
How concerned is Nikko AM about the state of certain European countries' sovereign debt?
We believe the current European sovereign-debt problem is a reflection of deteriorating finances for many developed nations. In this sense, the headlines facing Greece have broader ramifications for global markets.
Structurally, many EM governments now have sounder balance sheets compared to their developed-market counterparts. Although we expect the current crisis facing Greece will be resolved, it highlights the problems facing many developed countries: the need to cut back government expenditure at a time of economic fragility.
In contrast, many EM nations are not faced with these constraints, which means the growth differential will continue to improve in favour of EM countries and, as a result, their sovereign creditworthiness has the potential to improve.
How is this situation informing Nikko AM's investment decisions at the moment -- is it offering up any opportunities?
Yes. For example, the higher weighting in the green fund on EM currencies -- it is benchmarked to have 50% exposure to EM countries -- means this product offering will potentially benefit from the trends I've already mentioned.