In certain cases the team will use its clout as an investor to engage with company management and Drijkoningen cites chemicals, fertiliser and oil firm Sinochem in China as an example. The company’s analysts wrote to the firm with specific questions and it replied.
“Fixed income engagement is always very difficult because you don’t have a shareholder vote, yet there a
re ways to put a bit of pressure on the debt issuers to acknowledge certain concerns we might have. If we don’t get a satisfactory answer, we don’t invest.”
The firm excludes tobacco, controversial weapons and child labour across the board but for the most part it applies the philosophy that if a credit’s ESG credentials are weak, it commands a premium – ie, the higher the risk, the higher the premium.
This means the firm can, perhaps controversially, be overweight credits with weak ESG credentials. A case in point is Venezuela, where Neuberger Berman is starting to position for a recovery.
“Some people would possibly question this,” concedes Drijkoningen. “I can understand that but we are positioning for potential recovery and recovery values. It could be that the regime doesn’t leave, which would be bad news as we would then have to sit with it. I’m taking an extreme example saying we are not necessarily out of [controversial stocks].”
Drijkoningen sees this as a consequence of backing his team’s convictions.
“You could, of course, create a strategy in which you are just playing best in class,” he says, “but you are likely to give up a fair bit of potential upside in terms of alpha.”
Biography
Rob Drijkoningen joined Neuberger Berman in 2013. He is co-head of the emerging markets debt team and a senior portfolio manager responsible for more than $18bn in AUM and 33 investment professionals. He previously worked at ING Investment Management for almost 18 years, most recently as the global co-head of the emerging markets debt team responsible for more than $16bn. Drijkoningen began his career in 1990 on the sell-side at Nomura and Goldman Sachs.
Fund picker’s view – Ben Yearsley, director, Shore Financial Planning
“How can you amass $300bn of assets without being good at what you do? Although the emerging market bond desk at Neuberger Berman is only a small proportion of these assets at $12bn, the key managers have specialised in this area for 20 years. You don’t want to entrust your clients’ money to generalists.
The Emerging Market Debt Blend Fund is arguably its best ideas fund having the flexibility to invest across the emerging market debt spectrum from hard to local and sovereign to corporate. In my view, and bearing in mind emerging market debt will probably only be a small proportion of your portfolios, this is a good way to access the asset class.
“Performance has been good, though it has been beaten by Investec’s Emerging Market Blended Debt Fund since launch (for sterling investors). The process looks sensible and appropriate to the asset class mixing top-down views with bottom-up stock analysis – in emerging markets you have to view both parts equally.”
