The Japanese asset manager said Eurasia Group will integrate its proprietary geopolitical risk indicators into Nikko’s multi-asset investment management process.
The partnership will offer global investors a risk-controlled means of getting exposure to emerging markets, the two firms said.
“Emerging markets represent a compelling investment opportunity for global institutional and retail investors alike,” said David Semaya, executive chairman of Nikko Asset Management.
“In working with Eurasia Group, we’re going to be able to quantify important risks related to geopolitics and use that data within our investment portfolios, which will help us maximize the benefits of diversification by avoiding countries beset by crises or those headed in that direction.”
Nikko AM said it will make investment products available to both institutional and retail clients later in 2015.
“Asset managers have struggled to effectively incorporate geopolitical risk information in their portfolio management process, partly because of the sheer volume of data that is available,” said Al Clark, Nikko’s global head of multi-asset.
Clark believes Eurasia Group’s political risk signals will give Nikko AM an advantage in managing emerging markets portfolios.
The Eurasia framework includes country scores that capture current levels of political stability; formal assessments of the future outlook for political stability and its impact on the business environment; and asset pricing models that estimate the interaction between political risk and market prices.
“We are experiencing a world of geopolitical creative destruction. With so little lasting cooperation among governments and so many emerging political and economic challenges, the need for an investor roadmap has never been greater,” said Ian Bremmer, president of Eurasia Group.