Spotlight on Milan Vidojevic, Director, Quantitative Solutions, Northern Trust AM
Global Thought Leader Spotlight
Milan Vidojevic, Director, Quantitative Solutions, Northern Trust Asset Management
In my role as Director, Quantitative Solutions at Northern Trust Asset Management I am responsible for developing quantitative solutions for institutional investors across Australia, Asia Pacific, and Europe.
The landscape of sustainable investing, particularly within the equities domain, is rapidly evolving. In my experience, there is a growing trend towards aligning 2D financial goals (return, risk) with sustainability objectives, resulting in 3D (return, risk, sustainability) investment solutions, where all three elements are of equal prominence.
As a result, institutional investors are increasingly adopting systematic strategies to efficiently integrate diverse sustainability dimensions and bolster risk management.
This multifaceted approach enables investors to not only achieve financial gains but also contribute significantly to addressing climate change and other pressing sustainability challenges, thereby advancing the global United Nations' Sustainable Development Goals (SDGs).
Many thematic equity strategies focus on climate-related themes. While these strategies can be appealing, they may expose investors to non-targeted risks such as country, sector, factor and concentration risks. Our research shows that many of these non-targeted risks can act as transmission mechanisms for macroeconomic risks in portfolios. To address climate-related considerations, investment strategies need stringent risk controls. This involves assessing and managing various climate-related risks, including physical risks from climate events, transition risks from policy changes, and liability risks from legal actions as well as traditional financial risks.
Moreover, while many thematic equity strategies predominantly focus on climate issues, it's important to adopt a broader perspective. By adopting a multidimensional approach, investors can enhance their portfolio performance while contributing positively to climate change mitigation and embracing the wider sustainability challenges outlined by the SDGs. This approach encourages a more informed and responsible investment landscape, promoting the transition to a low-carbon economy and supporting the broader spectrum of sustainability initiatives.
Improvements in the quality of sustainability-related data is a game-changer, empowering investors to make more nuanced decisions and seamlessly incorporate sustainability considerations into their investment strategies. However, the challenge remains in sifting through the data to extract materially relevant and investment-grade information.
We believe that 3D strategies that effectively integrate sustainability considerations can generate both financial returns and positive impact, aligning with investors' dual objectives.
In addition, there is a role for institutional investors to play in promoting sustainability through active engagement with companies. By exercising their voting rights and engaging in a dialogue with company management, investors can encourage better ESG practices and promote the transition to a low-carbon economy. It is crucial that active investment strategies reflect the outcomes of these engagement efforts, thereby reinforcing the alignment between investment performance and sustainable impact.
Milan will be presenting at Global Investment Institute’s upcoming Net Zero Investment Forum, taking place on Wednesday, 27 March 2024 at the Grand Hyatt Melbourne, Victoria.
To register your interest in attending, click here or for more information email zlatan.kapetanovic@globalii.com.au.
Milan Vidojevic, Director, Quantitative Solutions, Northern Trust Asset Management
Milan serves as Senior Vice President and Director of Quantitative Solutions at Northern Trust Asset Management (NTAM). In this capacity, he engages with clients globally, to discern their distinct needs, crafting tailored investment strategies to drive client success. As a contributor to NTAM’s quantitative research initiatives, he plays an important role in shaping the strategic vision for its quantitative platform.
Prior to joining NTAM, Milan held roles in research and business development at Robeco Institutional Asset Management across financial hubs in the Netherlands and the United States. His research on factor premia and qualitative portfolio management has been published in various academic and practitioner outlets such as Journal of Empirical Finance, International Review of Finance, Journal of Portfolio Management and Journal of Alternative Investments.
Milan holds a Ph.D. in Finance from VU Amsterdam, and MSc and BSc degrees in Financial Economics from Erasmus University Rotterdam and the University of Toronto, respectively.
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