Posted inFRENELUXFixed Income

Belgian fund selectors give up on bonds

Consequently, they are radically reducing their fixed income holdings, mostly from already underweight positions. Three quarters of Belgian fund buyers will be reducing their exposure to developed market government bonds in the next 12 months. This is the highest number of sellers in the whole of Europe. 

“We normally have an allocation of about 50% to bonds in an average portfolio,” says Bart van de Ven of wealth management company Accuro. “Now we have heavily reduced this to close to 20%. We added to both our equity positions and to cash, which has a better risk-return profile than bonds at the moment.”

 

 

Van de Ven increased the allocation to high yield bonds of his clients’ portfolios in order to achieve higher returns, but he still expects those to be below 1% annually in the foreseeable future. He is not the only one looking to add risk to his diminished bond portfolio. While investment grade bonds are expected to be sold off universally, three in then Belgian fund buyers plan to increase their exposure to high yield bonds. However, the number looking to sell still stands above that, at 40%. 

Great rotation

While Belgian fund buyers are decreasing their overall weighting to fixed income, most are doing the opposite for equities. Some 60% of delegates at Expert Investor Belgium are currently in risk-on mode. Appetite is highest for European equities, with three quarters of Belgian fund buyers planning to increase their exposure. Besides, it’s worth noting that US equity sentiment has gone back in the green. More than a third of Belgian investors now want to increase their allocation to the asset class.   

Fed up

Belgium’s investors are waiting for the Fed to finally start raising rates so bond yields could go up, ultimately improving the risk-return profile of fixed income securities. Two thirds of the audience at Expert Investor Belgium believed the Fed should start raising rates immediately. This is in sharp contrast with the attitude of Swedish investors, who were polled last week. They believe it is still too soon for the Fed to start hiking rates. Compared to the Swedish central bank’s benchmark interest rate, which stands at 0.35%, the Fed’s rate of 0 is indeed rather high…

Click here to see a full overview of the event voting results.

Part of the Bonhill Group.