Robeco AM to invest $1-2 bn in mkts over 2 yrs

Niek Molenaar, MD, Robeco Asset Management said there is USD 1-2 billion flowing into the Indian market over the next two years in their portfolio itself.

He told CNBC-TV18 that Indian markets would see a lot of consumer growth and a lot of companies will benefit from that. He added that he wants to be part of the story in India and benefit from the growth there. He believes that a lot of infrastructural funds will make good progress because of the growth in consumer spending and added value in the Indian market. So, that is why he wants to invest in India and expand their portfolio.

Excerpts from CNBC-TV18’s exclusive interview with Niek Molenaar:

Q: What is the current investor appetite for emerging markets? Do you see the flow of funds improving as time goes by? In the current quarter, are you expecting flows to be better than earlier this year?

A: I see a structural demand for emerging market capabilities. We see that in Europe as well as the US. So, a lot of parties are willing to join in on the Indian and Chinese developments. They want to be part of that strong growth. Structurally, that means a lot of demand.

On the shorter-term, we have seen some slight outflows because of a lot of liquidity issues with all the banks. They needed to get some cash in to manage their balancesheet. We saw some cash outflows. But structurally, I see a lot of demand coming into India and to China.

Q: What is the weightage on India, particularly at this point in time, in your global portfolio?

A: At this point in time, within our global portfolio it is 7%. So, we are focusing on our equity product line. Currently, we are looking at USD 500-600 million and are waiting to improve on that. We expect it to be to about USD 1-2 billion in a few years in India alone. In China, we will see the same thing. So, we are really expanding in these emerging markets.

Q: How are you comparing equities as an asset class vis-à-vis fixed income and commodities? In the current year, could you see more flows out of equities into commodities at your own funds?

A: No, I do not see that. I expect some difficulties with my fixed income portfolio as the dropdown in interest rates has been dramatic. There will be flows from fixed income to commodities but mainly into equities. I see a lot of traction in my equity product line on the positive side.

Q: What is the inhouse view at Robeco about the US economy? Do you think it looks like the rate cuts in that economy are at an end? Are you expecting a rate hike later this year in the US?

A: We expect them to get to a slightly higher interest rate from these levels. So, there may be one extra rate rise but that is all for the end of the year. The US economy is slowing down. They need to keep the interest rates low to make sure that there is some growth while also taking care of inflation.

Q: You talked about USD 1-2 billion flowing into the Indian market over the next two years in your portfolio itself.  What are the themes that you are currently playing with or evaluating to really invest into?

A: For Indian markets, we see a lot of consumer growth, which means there will be a lot of companies that will benefit from that. That is why we want to be part of the story in India and benefit from the growth there. We will see a lot of infrastructural funds making good progress because of this growth in consumer spending and because of the added value in the Indian market with the number of people that is still growing dramatically compared to the rest of the world. So, that is why we want to invest in India and expand our portfolio there.

Q: There is also this emerging danger of inflation across Asia including India. Do you see the surging oil prices, commodity prices and the surging inflation to spoil the growth picture in India and other emerging markets? Do you see any outflow or possible serious sell-off in these markets as a possibility in the current year?

A: There is always a possibility. Nothing is sure in asset management and in asset flows. But we will see serious outflows. Obviously, inflation is a danger and we have to monitor that very carefully. All the other regulatory bodies are doing their utmost to make sure that inflation is in control. So, I am not too worried about that.