Nikko Asset Management is seeking to enhance its risk-controlled investment offering through a partnership with Eurasia Group.

Japan's Nikko Asset Management has partnered with global political risk research and consulting firm Eurasia Group to offer investors risk-controlled exposure to emerging markets.

The global asset manager will use Eurasia's existing methodology to determine geopolitical risks and their impact on emerging market asset prices. The systematic approach identifies current and forecast levels of a country's political stability, and adopts asset pricing models estimating the interaction between political risk and market prices.

“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 maximise the benefits of diversification by avoiding countries beset by crises or those headed in that direction,” said Nikko Asset Management's executive chairman, David Semaya.

As investors look to diversify their portfolios through multi-asset strategies, emerging markets and developing economies are expected to grow by 4.3 per cent this year, racing ahead of the 2.4 per cent growth estimated for advanced economies, according to the International Monetary Fund.

“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, global head of multi-asset at Nikko Asset Management. 

“Eurasia Group’s political risk signals and other assessments give us a proven means of quantifying what has been at best a qualitative input up to now, and we believe this will give us a distinct advantage in managing emerging markets portfolios.”

Investment products arising from the partnership will be available to both retail and institutional clients later in 2015.