LONDON: ING Investment Management is mulling a boost to Middle East and North Africa investments, betting that the current political unrest will not hinder long-term growth prospects, its chief investment officer said.
Jan Straatman told Reuters he was unfazed by the turmoil in the region, where popular uprisings have already toppled the Egyptian and Tunisian regimes and may soon unseat Libya’s Colonel Gaddafi.
"To me, it offers an opportunity to increase our exposure to emerging markets," Straatman said in an interview.
While reluctant to elaborate on the size of the extra investment that ING could commit, Straatman noted that ING IM already managed a "significant" emerging market exposure and was sanguine on long-term prospects.
"We think those markets will continue to develop, become stronger, while developed markets remain much more unsettled," he said.
Straatman sees geopolitical risk as the flipside of the potential lucrative returns linked with emerging markets investments.
"What people are forgetting is that if you see the dramatic changes and growth we see in emerging markets, that could lead to some instability and some volatility," he said.
Fees
The focus on emerging markets is part of Straatman’s strategy to steer the unit towards high-margin, high-fee business, catering for investors prepared to pay extra in the hope they will be rewarded with higher returns.
ING IM, which has €387 billion ($532 billion) in assets under management, is set to add to its product range a "hybrid strategy," giving access to emerging markets equity, credit and currency, he said.
It is also putting together a new absolute return proposition, which seeks performance independent of market conditions — ideally outperforming bull markets, and defending against downturns.
The new products are likely to be launched in the second half of the year, Straatman said.
Customers are more critical about the structure and costs of their investments after heavy losses during the financial crisis, which revealed that in some cases they were paying a premium for products that mirrored instead of beating markets.
"Clients want more transparency, they want to understand much better how we construct portfolios and how we manage risks," Straatman said.
"In the past we had more standardized fees. We are having more conversations right now … We also opened up the opportunity for performance fees using high watermarks and clawbacks in the future. All of these things are going to be more up for discussion," he said.
Enhanced scrutiny does not stop investors from awarding lucrative mandates, though. "I think clients are still willing, probably more willing, to pay for quality," he said.
