Economic and financial uncertainty

Economic and financial uncertainty remains, driven by several factors: weaker economic recovery in the US and Europe than in previous post-crisis periods, a deceleration of growth in China, extraordinary monetary policies, political populism, and Brexit.


2016 saw a dramatic political shift. This was most notably evidenced by Brexit, the US election, and the Italian referendum – which saw the Italian people vote against a proposal to move power from the regions to central government, and for a reduction in the size of the central government. 

Terrorist attacks, cyber strikes, a refugee crisis, and deepening inequality in many nations compounded the high level of political, economic and market uncertainty. 

Such an environment can impact international commerce, changing the terms of business, affecting international cooperation, investment and risk. 

While the impact of elections in France, Germany and the Netherlands remain uncertain, volatility can also present opportunities. The depreciated euro versus the US dollar has improved European competitiveness.

Markets have been optimistic about President Trump’s fiscal policies. Potential tax changes could stimulate the US economy, generate lending, and boost capital growth.

China is transitioning from an industry to a service-driven economy, which is decelerating economic growth. While it continues to lift many of its1.3 billion population out of poverty, it remains the single largest contributor to global GDP growth.


At the start of 2016, financial markets were under pressure due to concerns about the Chinese and global economies, and a steep decline in oil prices. We felt these were short-term developments, and acted accordingly. Toward the end of the first quarter, these developments had less of an impact on financial markets. 

In the second quarter, the focus was on the UK referendum to leave the European Union. We had viewed the outcome as difficult to forecast, and positioned our investment portfolios cautiously. Kames Capital, Aegon Asset Management in the UK, resisted the reactions of some European investors that led to outflows from property funds in the immediate aftermath of Brexit. Kames Capital was one of the few UK direct property funds to stay open for business. Property is now broadly back to where it was in terms of valuations and transaction prices.

Weathering political storms

During the second half of 2016, we navigated our way through political storms by adjusting risk exposures across our portfolios, which was a beneficial approach for our funds.

Electing to control risks

The election of a new US president brought more uncertainty. We reduced our risk exposure across portfolios around this event to effectively control them. As an example, for our Global Tactical Asset Allocation Fund, which is managed by Aegon Asset Management in the Netherlands, we took steps to reduce our exposure to risk related with US equities before the US elections. In the week before the elections we indeed saw a heavy drop for US equities, and while in the end we weren’t able to make additional profits as the market unexpectedly reacted very positive to the Trump election, we did successfully reduce our risks. 

With more clarity on what the new administration means for both the US and global economies, we will have more certainty in relation to investment risks to take or avoid.

Group Risk function

Our Group Risk function ensures a coherent and integrated approach to risk management, supported by a comprehensive range of company-wide risk policies that detail specific operating guidelines and limits. These are designed to keep risk-specific exposures to a manageable level. Any breaches or warning levels trigger immediate remedial action or heightened monitoring. 

The Management Board is fully advised on, and regularly updated about, this important function. Our Group Risk Officer, Allegra van Hövell-Patrizi, was appointed as a member of the Management Board in January 2016.