NORDIC FRIENDS LOUNGE 21
On the lookout for solutions Prospects of rising inflation and yields as well as the omnipresent concern of climate change: which strategies can help investors meet the challenges of our day? Three investment solutions stand out.
A way forward: as the global economy recovers, investors face new challenges. Global listed infrastructure, European covered bonds and green bonds offer solutions.
Hedging against rising inflation In the current market environment, global listed infrastructure should be on investors’ radar for two reasons. No. 1 is rising inflation. “The contracts of the underlying infrastructure usually allow its owners to pass along increases in inflation to users through increased tariffs and rates. Thus, infrastructure can serve as a hedge against rising inflation,” says Jeremy Anagnos, portfolio manager at CBRE Clarion Securities and manager of the Nordea 1 – Global Listed Infrastructure Fund . Reason No. 2: long-term trends such as decarbonisation and digital trans- formation are creating strong tailwind for the asset class. “These secular themes are creating substantial opportunities for investment,” Anagnos explains. Generating alpha 2 During the pandemic, central banks and govern- ments worldwide provided unprecedented stimulus, the legacy of which could be higher interest rates in the future. In a still depressed yield environment in which duration seems the only way to access a (minimal) yield in the safe fixed income universe, prospects of rising yields are putting pressure on fixed income investors. The Nordea 1 – European Covered Bond Opportunities Fund offers a way out.
It is firmly rooted in the universe of covered bonds and its characteristics (high credit ratings, double recourse and security). However, thanks to its dura- tion hedge to around one year, it is able to efficiently navigate rising yield environments. At the same time, an increased exposure to covered bond spreads translates into the ability to capitalise on relative value opportunities on the market and amplifies the fund’s alpha potential. Thus, the portfolio is well po- sitioned to take advantage of the opportunities from an uncertain market environment on the yield side and has a potential for an attractive performance regardless of interest rate movements. Going green Climate change is a main cause for concern for many investors. Global green bonds are one way to achieve a positive environmental impact and, at the same time, hedge against climate-related risks. “Green bonds play an increasingly important role in financing assets needed for the low carbon transi- tion,” says Anton Nykvist, one of the managers of the Nordea 1 – Global Green Bond Fund . He and his co-manager Sascha Stallberg have made it their mission to find the best investment opportunities in the fast-growing green bond market.
2 There can be no warranty that an investment objective, targeted returns and results of an investment structure is achieved. The value of your investment can go up and down, and you could lose some or all of your invested money.
ISSUE 02.2021
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