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This preface was originally written in Dutch. This is an English translation.
Looking beyond returns and risk
Financial markets have presented a striking picture in recent months. In the US in particular, the earnings season was stronger than expected, whilst several major Asian companies also delivered positive surprises. Despite this, equity markets reacted in a relatively measured manner. Much of the optimism appears to have already been priced in.
At the same time, interest rate trends remain a key factor. Long-term interest rates in many major markets are significantly higher than they were for much of the past decade, meaning that financing costs are also at a higher level.
This new investment climate is also evident in private markets. High valuations and generous financing terms may be less readily extrapolated into the future. Consequently, the focus is shifting more strongly towards credit quality, cash flows and the actual economic value of investments.
It is precisely in such an environment that Real Assets come more firmly into focus. Property, infrastructure and other real assets offer direct exposure to the real economy and can contribute to long-term cash flows, diversification and protection against inflation.
At the same time, selectivity has become more important within the real assets sector too. Higher financing costs, geopolitical shifts, the energy transition and the rapid growth of AI are altering both the opportunities and the risks. In a world where capital has become more expensive, the focus is increasingly on selecting the right assets, in the right location and at the right price.
In this edition of Financial Investigator, we focus extensively on Real Assets and Private Equity. During the round-table discussion on property, it emerged that investing in social real estate is increasingly driven by a dual ambition: achieving financial returns whilst creating social value. These objectives need not conflict with one another; under the right conditions, they can actually reinforce each other.
A similar conclusion emerged during the round-table discussion on Impact Investing in Private Equity. There, too, it became clear that impact and returns need not be mutually exclusive. When solutions to social issues develop into scalable and economically viable business models, financial and social value can go hand in hand.
In this regard, it is important to look not only at individual investments, but also at the broader systems of which they form part. During one of the panel discussions, a case was therefore made for more ‘systems thinking’: examining the interconnections between assets, sectors and social developments, and identifying where investments can reinforce one another.
That ability to look beyond individual markets and asset classes requires perspective and experience. For this issue’s cover interview, we spoke to Ruud Hendriks, one of the doyens of the Dutch financial sector. Now 80 years old, he remains highly active and possesses an undiminished supply of energy. It was a fascinating conversation about decades of investment experience, but above all about lessons that extend beyond markets, returns and risk.
Enjoy reading!
Jolanda de Groot, Editor-in-Chief