For professional use only
Month ending 30 June 2017
NN First Class Multi-Asset Premium
Strategy Brief
Portfolio Management
Ewout van Schaick
Lead Portfolio Manager
Experience since: 1997
With firm since: 2007
Strategy Description
The First Class Multi-Asset Premium Strategy is a globally diversified,
benchmark unaware strategy aiming for long-term capital growth
and designed to actively respond to changing market environments.
Objective
The strategy aims to deliver an annualised return of 1-month
EURIBOR + 5% before fees over a five year period with a clearly
defined risk budget (target ex-ante volatility 8%; maximum 15%).
Niels de Visser
Senior Portfolio Manager
Experience since: 1997
With firm since: 2011
Mark Robertson
Senior Portfolio Manager
Experience since: 2000
With firm since: 2006
Responsible Investing Approach
ESG
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For more information about our
responsible investing approach
within First Class Multi-Asset
Premium, please visit the strategy
page at www.nnip.com
Investment Process
We aim to achieve the investment objective by harvesting the longterm risk premiums, through tactical positioning in a risk aware and
robust manner and from bottom-up securities selection. The longterm risk premiums are captured by applying a risk budgeting
approach where the risk budget is equally divided between ‘relatively
safer’ assets and risky assets to arrive at the strategic allocation. The
final portfolio allocations are determined during the tactical asset
allocation process. In this process our view generation is driven by
both quantitative (fundamental and behavioral) signals as well as
qualitative judgment. In case risky assets become extremely volatile
and/or we don’t deem them attractive anymore from a risk-return
perspective, we can allocate more to relatively safer government
bonds and/or cash and money market instruments. This can provide
a margin of safety in the event of significant market downturns. On
the other hand if risks decrease and/or if we see more opportunities,
we can increase our allocation to more riskier assets which typically
offer higher returns. This dynamic asset allocation process enables
us to exploit attractive investment opportunities when they arise.
Furthermore we can take long and short positions using derivatives,
including net short positions at an asset class level, to benefit from
expected market upturns and downturns in order to achieve the
objectives.
Quantitative
Qualitative
1. Behavioural Insights
• Detection of structural & temporal shifts not
captured by quant signals
• Dynamically adjust to unexpected shocks
• Sentiment
• Momentum
• Liquidity & Flows
2. Fundamental Insights
NN Investment Partners at a Glance
NN Investment Partners is the asset manager of NN Group N.V.,
a publicly traded corpora­tion. NN IP is head-quartered in The
Hague, The Netherlands. NN IP manages in aggregate approximately EUR 194 bln* (USD 208 bln*) in assets for institutions and
individual investors worldwide. NN IP employs over 1,100 staff
and is active in 15 countries across Europe, U.S., Latin America,
Asia and Middle East.
* Figures as of 31 March 2017
For more information on NN IP’s investment strategies or our mutual
funds, please contact your sales representative or relationship manager.
Or visit our website www.nnip.com
• Macro Regime
• Cyclical momentum
• Valuation
NN IP Market Views
Key Elements of the Strategy
• All-in-one Multi-Asset solution
• Your entry into a World of Opportunities
• A clear return objective
• Aiming to avoid negative surprises
• Liquid and transparent
• Net short positions at an asset class level allowed
www.nnip.com
NN First Class Multi-Asset Premium - Strategy Brief
Reference performance for this strategy: NN (L) First Class Multi Asset Premium (I Cap, EUR), gross of fees*
1 Month
3 Months
6 Months
YTD
1 Year
2 Years (Ann.)
3 Years (Ann.)
Since Inception
Portfolio Return
-0.56
0.05
1.73
1.73
8.17
5.53
9.65
10.56
Benchmark Return
-0.03
-0.09
-0.19
-0.19
-0.38
-0.29
-0.19
-0.18
Relative Return
-0.53
0.14
1.91
1.91
8.55
5.83
9.84
10.74
* Source: NN IP Performance Measurement. Benchmark: Euribor 1-month. Returns are presented after all transaction costs, but before management fees.
Returns include the reinvestment of income. Fund was launched on 18 May 2014. Past performance is no guarantee of future results and the possibility of loss
does exist. Performance prior to the launch date has been simulated on the basis of the past performance of another, comparable share class of the fund.
Main Points
• First Class Multi Asset Premium lost -0.56% for the month
• Increased exposure Investment Grade Credits, High Yield,
EMD LC and HC and Equities; decreased exposure to
Peripheral Bonds and Commodities; Real Estate positioning more or less the same
• Portfolio duration more or less the same at 1.3 (from 1.4)
Market Review
Much of the focus in June was on the central bank meetings, especially the meetings of the Fed and the ECB. Also the Bank of England
meeting led to some price action in the government bond market. The
Fed rate hike in June was fully anticipated by the market, but the
accompanying message was taken as hawkish, as the Fed was willing
to look through the weakness in inflation. The market interpretation of
the ECB meeting was dovish, but the market reacted strongly to a
speech by Draghi towards the end of the month where he signaled
that growth conditions have overall strengthened during the past
years and deflationary risks have been reduced. Although the speech
was quite balanced in our view, the market seems to focus on the
hawkish elements.
The level of growth data continues to be strong, however we did witness another decline of our economic data surprise indicator. Also the
inflation environment remains sluggish.
In total return, measured in local currencies, European (-2.5%) and UK
(-2.5%) equity returns were negative, but Japan (+2.7%) , US (+0.6%)
and EM (+1.0%) had a positive net total return. The Equity market is
supported by solid earnings growth. We expect 15-20% earnings
growth. Market performance could match these numbers with the
cleaning up of Spanish and Italian bank problems, less political risks in
Europe and more shareholder activism as additional positive factors.
A risk to the equity market outlook would be continued oil price weakness. The oil price impacts the equity market through different channels. First, it impacts the energy sectors’ profitability. Secondly the
economy as a whole could be impacted through lower capex and
thirdly through inflation expectations. There is a link between trends
in the oil price and inflation expectations. A lower oil price could then
influence bond yields, which represents an important headwind for
the financial sector.
The main event in bond markets was the rise in government bond
yields, especially in Europe and particularly in the last week of the
month following the above mentioned Draghi speech. The yield of the
10 year Bunds increased 16bp, while the yields of UK Gilts and US
Treasuries increased 21bp and 10bp respectively. The bond market
volatility spike in the last week of June is an example of the increased
nervousness in bond markets about the exit strategy of the ECB.
Furthermore Fixed Income Spread markets have performed reasonably well despite the government bond yield rise. Spread levels
declined for Investment Grade and High Yield in June. Only in EMD
there was some mild spread widening. However, the spread tightening
was only enough to achieve positive total return in Euro High Yield and
US investment Grade and High Yield. Euro Investment Grade had a
small negative total return in June (-0.6%). In general, FI Spreads continue to benefit from investment flows, but valuations remain very tight.
For Commodities it has been another sluggish month. The Bloomberg
Commodity index had a return of -0.2% (in USD) and is down 5.3%
year-to-date. The Brent oil price declined by 4.8% in June and is down
by 15.7% year-to-date. We expect the oil market to rebalance with the
extension of the production cut deal reached in May between 25
opec and non-opec countries and (US) oil inventories to tighten going
forward. The latter should be particularly the case from Q3 on as seasonality turns more favorable.
Investment Performance
In June, the strategy lost -0.56%. Within risky assets our positions
in Investment Grade Credits contributed the most followed by
Real Estate and High Yield. Our positions in Emerging Market
Debt, Equities, Peripheral Bonds and Commodities detracted from
performance. Furthermore the relatively safer assets detracted
from performance as well in Euro terms. The negative impact of
the strengthening of the Euro was partly offset via our currency
hedging policy.
Outlook and Portfolio Positioning
Our base case remains. We continue to expect a medium term
continuation of the moderate global economic recovery. From a
monetary policy perspective we expect the Fed to continue on the
gradual path of normalizing monetary conditions, which implies a
process of gradually increasing yields in the coming years. In general, this environment, despite some loss of economic momentum,
continues to be a support for risky assets.
Within the top down allocation we have upgraded Equities to +2
and also upgraded Fixed Income Spreads to +2. With regards to
Equities macro, earnings and politics have been supportive while
we expect that the monetary policy normalization path will be
gradual. Hence, the environment for Equities continues to be constructive. With regards to Fixed Income Spread the arguments are
similar (combination of positive macro environment, but no overheat, against a background of gradual monetary policy normalization). In addition, investment flows into FI Spreads continues to be
positive. After these changes we continue to hold on to our risk on
bias.
Within Fixed Income Spreads we have upgrade US High Yield and
downgraded European High Yield (just after month end). Euro
High Yield has performed better than US High Yield, thanks to relative economic data surprises, declining political risks in Europe
and higher oil price sensitivity of US High Yield. We expect further
stabilization in oil prices, which is a relative support for US High
Yield. Additionally other indicators have deteriorated somewhat
for Euro High Yield relative to US High Yield like corporate surprises, earnings momentum, leverage and momentum.
Furthermore we have added to our EMD Local Bonds allocation
just after month end, on the back of positive investor flow momentum, inflation surprising to the downside and a number of EM central banks easing monetary policy.
Within Equity regions, we have added to our allocation to Japan.
This change is supported by earnings growth, risk premium, political stability and loose monetary policy against a background of
underperformance versus other regions since the start of the year.
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Month ending 30 June 2017
Portfolio Highlights*
Portfolio Characteristics
Currency
EUR
Strategy Assets under Management
€173 mln
Standard Deviation Fund
8.40%
Sharpe Ratio
1.20
Modified Duration of the Portfolio
1.32
Re-based Performance Since Inception
140
135
130
125
120
115
110
105
NN L First Class Multi Asset Premium (I Cap, gross of fees)
100
Jun-17
May-17
Apr-17
Mar-17
Feb-17
Apr-16
Jan-17
Apr-16
Mar-16
Dec-16
Mar-16
Feb-16
Nov-16
Feb-16
Jan-16
Oct-16
Jan-16
Dec-15
Sep-16
Dec-15
Nov-15
Aug-16
Nov-15
Oct-15
Jul-16
Oct-15
Sep-15
Jun-16
Sep-15
Aug-15
May-16
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Monthly Returns (%)
10
8
6
4
2
0
-2
-4
NN L First Class Multi Asset Premium (I Cap, gross of fees)
-6
Jun-17
May-17
Apr-17
Mar-17
Feb-17
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Asset Breakdown (Exposure)
100%
88%
80%
60%
40%
40%
21%
20%
22%
17%
18%
9%
8%
5%
0%
0%
0%
-3%
-20%
High Quality
Cash, Money Market
Government Bonds
& FX
Equities
Listed Real Estate
Higher Risk
Government Bonds
EMD (HC)
EMD (CB)
EMD (LC)
EM (FX)
High Yield
Investment Grade
Commodities
Historical Asset Breakdown (Exposure)
300%
250%
200%
150%
100%
50%
0%
-50%
-100%
Jun-17
May-17
Apr-17
Mar-17
Feb-17
Jan-17
Dec-16
Nov-16
Oct-16
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Jan-15
Dec-14
Nov-14
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
Commodities
Investment Grade
High Yield
EMD (FX)
EMD (CB)
EMD (LC)
EMD (HC)
Higher Risk Government Bonds
Listed Real Estate
Equities
Cash, Money Market & FX
High Quality Government Bonds
* Source: NN Investment Partners. All data are expressed as of 30 June 2017. Standard Deviation and Sharpe Ratio based on monthly observations since end of inception month.
3
NN First Class Multi-Asset Premium - Strategy Brief
Currency
Max Management
Fee (%)
LU1052149280
EUR
LU1052149363
EUR
X Capitalisation
LU1052149793
N Capitalisation*
LU1052149959
I Capitalisation (hedged i)*
LU1156027051
Share Classes
ISIN
I Capitalisation
P Capitalisation
Fixed Service
Fee (%)
Ongoing charges including
management fee (%)
Minimum Investment
0.60
0.15
0.78
€ 250,000
1.20
0.25
1.52
-
EUR
2.00
0.25
2.32
-
EUR
0.60
0.25
0.92
-
PLN
0.60
0.15
0.80
€ 250,000
* only available for the Dutch market
Key Characteristics of the Strategy
Investment universe
Multi-asset; bonds (government bonds, investment grade and non-investment grade bonds), equities,
money-markets, real-estate, commodities, currencies
Investment style
Diversified capital growth
Return Objective
EURIBOR + 5% annualised before fees over 5-year horizon
Risk target
Annualised ex-ante volatility of 8%, max 15%
Base Currency
EUR
Disclaimer
This document has been prepared solely for promotional purposes and does not
constitute an offer, in particular a prospectus or any invitation to treat, buy or sell
any security or to participate in any trading strategy and cannot be understood as
provision of investment services. The content of this document is based upon
sources of information believed to be reliable. However, no guarantee, warranty or
representation, express or implied, is given as to the accuracy, correctness or completeness of such information; and neither NN Investment Partners B.V., NN
Investment Partners Holdings N.V. and its subsidiaries, nor any other company or
unit belonging to the NN Group, nor any of its officers, directors or employees
accept any liability or responsibility in respect to the information or any recommendations expressed herein. Any information given in this document may be subject to
change or update without notice. Investment sustains risks. Please note that the
value of your investment may rise or fall and also that past performance is not indicative of future results and shall in no event be deemed as such. Do not take unnecessary risk. Read the Key Investor Information Document. The prospectus, supplement and the Key Investor Information Document are available on the following
website: www.nnip.nl. Any claims arising out of or in connection with the terms and
conditions of this disclaimer are governed by Dutch law.
The fund is a subfund of NN (L) (SICAV), established in Luxembourg. NN (L) is duly
authorised by the Commission de Surveillance du Secteur Financier (CSSF) in
Luxembourg. Both funds are registered with the CSSF.
For more detailed information about the investment fund we refer to the prospectus
and the corresponding supplements. In relation to the investment fund mentioned in
this document a Key Investor Information Document (KIID) has been published containing all necessary information about the product, the costs and the risks which
may occur. Do not take unnecessary risk. Read the prospectus and the KIID before
investing. Investments are accompanied by risks. The value of your investments
depends in part upon developments on the financial markets. In addition, each fund
has its own specific risks. See the prospectus for fund-specific costs and risks. The
prospectus, supplement and the Key Investor Information Document are available
on the following website: www.nnip.com. This document is not directed at, and must
not be acted upon by citizens of the United States (US) and is otherwise only
directed at persons residing in jurisdictions where the relevant share classes/(sub)
funds are authorised for distribution or where no such authorisation is required.
4