In a matter of months, the macroeconomic mood of the Belgian fund selector community has shifted fundamentally. Back in September, more than 80% were optimistic about the general outlook for the economy. Now, the majority are neutral, while even some have turned bearish.
Better safe than sorry
Meanwhile, Belgian investors prefer large cap value stocks over riskier small cap and growth investments. With the exception of European equities and absolute return, which is generally associated with lower risk, there is no great willingness to increase exposure to any asset class.
Within absolute return, global macro strategies enjoy the highest popularity. Two thirds of fund selectors attending the conference are invested in the asset class, and roughly a third of those want to increase exposure.
Global macro funds try to make a profit from big, idiosyncratic macroeconomic events, such as an unexpected rate rise in the US. Four out of six of the fund managers speaking at the conference mentioned exactly this as their main macroeconomic concern for their asset class.
Rate rise risk
“A rate rise in the US in June is the biggest risk for my asset class,” said Adrian Hull, manager of the Kames Global High Yield Bond Fund. “Outflows could undermine the asset class, though actually I am not particularly worried about this. If high yield gets say, 50 basis points cheaper, you will see funds flowing back.”
A US rate hike or another macroeconomic event could lead to a liquidity dry-up, Ugo Montrucchio (pictured), a multi asset fund manager for Schroders, warned. Investors could collectively decide to sell out of a certain asset class on such on occasion. “Many asset classes have experienced enormous amount of flows, with very little dispersion. If liquidity dries quickly we could experience big corrections,” he said.
Geopolitics, back on the agenda?
On top these risks, investors could see themselves confronted with a host of geopolitical challenges as well, most of which have been generally ignored over the course of 2014. “Of all geopolitical risks, Russia most certainly worries me,” said Hull. “The oil price slump has pushed geopolitics back into the frame. The guys who run Russia now have more to gain now with waging war than with de-escalation.” Belgian fund selectors seem to agree a significant extent. Some 43% expect significant long-term damage to the European economy as a consequence of the conflict in Ukraine.
There is another country which is giving European politicians a headache at the moment, though most of Belgium’s fund selectors think that the Greek problem will fizzle out. Only 13% believe in a Grexit, and a clear majority assesses financial markets were right in largely ignoring the bold statements made by representatives of the newly elected Syriza party in recent weeks.
Click here to see a full breakdown of the event voting data.
Click here to see a slideshow of photos taken during Expert Investor Belgium.
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