While we witnessed no shortage of volatility in 2020, markets stayed resilient and ended the year on a euphoric note. With equity markets trading at all-time highs and bond market spreads at all-time tights, upside in on-the-run public risk assets may be limited, while risk appears to remain to the downside, particularly with potential headwinds from further COVID-19 spread in the developing world, slower-than-anticipated vaccine rollout outside the U.S., and potentially rising interest rates. We believe investors can be well served by diversifying exposure into more off-the-run and uncorrelated assets that are both experiencing structural tailwinds and gaining traction among investors.
In this anthology, we identify strategies we believe can be key elements of a portfolio in the current and coming market environment. Carbon credits are an example of an asset that can offer attractive uncorrelated returns with structural downside protection, while benefitting from multi-year societal and political tailwinds. In addition, while integration of environmental, social, and governance (ESG) and socially responsible investing (SRI) principles has been a major theme across the traditional asset management space in recent years, the trend has accelerated among hedge funds that can benefit not only from investing in companies with strong ESG principles, but also by taking an active role in helping companies add value through implementation of some of these principles. Finally, accounts-receivable financing has picked up momentum among credit hedge funds seeking to earn attractive yields with a limited risk profile as they serve to fill the financing gap left by banks shying away from lending to middle-market companies under duress.
We hope you find this publication useful as you assess portfolio strategy in the coming months. Please contact your Neuberger Berman team with any questions.
Articles
Opportunistic Investing: Carbon Credits
For medium-duration investors, carbon credits can offer attractive uncorrelated returns with structural downside protection, while benefitting from multi-year societal and political tailwinds.
ESG and Sustainability Strategies Gain a Foothold in the Hedge Fund Universe
Hedge funds have been relatively slow to adopt environmental, social and governance (ESG) investment approaches, but are quickly coming up to speed.
Capital Solutions: Accounts Receivables Factoring and Financing
Current economic stresses and ongoing risks in traditional credits reinforce the potential advantage of accounts receivable financings to debtors and creditors alike.
