Our latest investment sentiment survey was conducted shortly after the Belgian capital Brussels had emerged from a lockdown amid an alleged terror threat. It’s not sure whether this negatively affected their investment outlook, but fact is that the Belgian appetite for all major asset classes has come down compared to the previous quarter.
US equities, European equities and high yield bonds were the main fallers. There is one investment category bucking this trend though: as many investors who are unsure or negative about the investment outlook do, they overwhelmingly expressed their intention to increase exposure to absolute return funds.
Especially long/short equity and multi-strategy are popular.
As the chart below shows, six in 10 Belgian fund selectors are planning to up their exposure to absolute return funds. This is a threefold increase from the previous quarter.
So fund buyers from Belgium are looking to bring their asset allocation more in line with Tim Peeters, who is in charge of fund selection and asset allocation at multi-family office Portolani in Antwerp. Peeters is a staunch fan of absolute return funds, and had been gradually increasing his allocation over the years.
“At the moment, my average allocation to absolute return funds is 40% of the portfolio [up from about 25% a year ago]. One client even has an exposure of 60% to absolute return,” he says. Within absolute return, he prefers multi-strategy funds such as SLI GARS and the Aviva Multi Strategy Target Return Fund. “But we have at least three different funds per client, because the maximum portfolio exposure to one fund is 10%,” he adds.
Most Belgian fund selectors have always had an ambivalent attitude to absolute return, and their asset allocation intentions have behaved accordingly. While fund buyers in most countries are pretty consistent in their attitudes towards alternative investment funds, this is not the case for the Belgians. The fact that interest in global macro funds has come down since October while general interest in absolute return funds has gone up, illustrates this.
So is the current interest in absolute return, a trend visible in the whole of Europe, here to stay? Absolute return funds are popular in every single European country now, and Peeters believes this trend is set to continue. “Considering the events we have seen this week [with stock markets deep in the red on both Monday and Thursday], I’m very happy my portfolios are relatively insulated from this sort of shocks.”