Slovenia’s NLB Skladi brushes off recession fears as it expands Balkan presence

NLB Skladi, celebrating its 20th anniversary this year, has emerged as the standard-bearer for financial innovation in Southeastern Europe. Commanding a formidable 40 percent of Slovenia’s mutual fund market, the fund has been systematically acquiring regional rivals whilst championing alternative investments in a market traditionally wary of financial sophistication.

In May, it acquired Generali’s Macedonian operation, promptly rebranding it as NLB Fondovi Skopje. Barely four months later, it had planted its flag in Serbia through the acquisition of Kombank Invest.

“At NLB Group, we believe in the development of investment products in Southeastern Europe,” explains Luka Podlogar, chief executive of NLB Skladi, whose measured words belie the scale of his ambition, as the firm plans to harness its extensive branch network to distribute sophisticated investment products across the region.

While many houses maintain alternative assets at the periphery of their offerings, Podlogar positions them as cornerstone investments, particularly for investors looking to move beyond conventional asset allocation. “At NLB Skladi, we firmly believe that alternative investment funds offer exceptional opportunities for investors seeking higher returns, greater diversification, and protection from the volatility of traditional capital markets,” he explains, outlining a strategy that looks beyond traditional market correlations.

His approach rests on what he sees as a fundamental market challenge: the search for investments that deliver both stability and growth. “Alternative funds provide precisely this—access to asset classes such as real estate, private equity and infrastructure that exhibit lower correlation with traditional capital markets.”

Longterm, the firm anticipates alternatives playing an increasingly crucial role in both portfolio stability and wealth creation. For now, though, its traditional investment business is flourishing; €189.5m in net inflows over nine months, but it is perhaps the retention figures that prove most telling. A 44.4% share of gross inflows would satisfy most managers; the higher net figure of 52.3% points to something more significant—an ability not just to attract capital, but to keep it.

Supporting this success is an optimistic market outlook. They see neither the spectre of deep recession nor any significant deterioration in employment levels on the horizon. More notably, their analysts expect inflation to retreat further from late-2023 peaks. Rok Potočnik, senior portfolio manager, offers a remarkably sanguine view of global prospects, as the spectre of recession that has haunted market sentiment is likely to prove chimeric. “We believe that the year will be positive for both asset classes, but even more so for stocks than for bonds,” he says, whilst tempering enthusiasm about a repeat of last year’s exceptional returns. 

The firm’s conviction extends beyond mere outlook, instead pointing to a confluence of supportive factors: stable employment, inflation edging towards target levels, and modest but sustained economic growth. Robust corporate earnings growth, coupled with anticipated monetary easing by major central banks, they argue, should continue to underpin equity valuations. Potočnik translates this into practice: “We maintain an above-average exposure to equities relative to bonds, whilst favouring both asset classes over cash positions.”

This confident stance is reflected in NLB Skladi’s investment portfolio, which warrants a closer look. They maintain a bullish stance on artificial intelligence infrastructure, though the sector’s true revolution—in software solutions—remains unrealised. Perhaps more striking is their stance on healthcare equities, a sector many investors have dismissed as post-pandemic deadwood. The prospect of lower interest rates could spark a wave of consolidation in an industry ripe for merger activity, whilst artificial intelligence promises to streamline the notoriously costly drug development process. The moderation in wage pressures offers particular promise for American healthcare providers, where staffing costs have traditionally eaten into margins.

Yet it is their view on Chinese markets that best illustrates the firm’s thinking. Beijing’s recent announcement of robust measures to reinvigorate its economy has caught their attention. “Should these initiatives gain traction in the real economy, equity prices could respond accordingly,” notes Potočnik. “Current valuations,” he adds, “make the proposition particularly interesting.”

Twenty years after its founding, NLB Skladi presents an interesting case study in market evolution. Whilst its dominance in Slovenia might suggest natural limits to growth, recent moves indicate rather broader horizons. That it continues to attract significant capital suggests its thesis for southeastern European market development resonates with sophisticated investors. The true test, of course, lies ahead. Its combination of regional expansion and investment innovation will be tested by the same economic headwinds that have challenged more established European houses. For now, however, Slovenia’s largest asset manager appears to be writing a rather different playbook.