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Infrastructure is biggest story in Belgium right now

Belgian investors are very keen on infrastructure, with interest in the sector markedly standing out relative to the rest of Europe.

Indeed, it is head and shoulders above all other asset classes – with over 60% of Belgian asset managers looking to increase their allocation in the next 12 months, according to Expert Investors’ latest Future Flows survey.

Respondents are fund selectors, asset allocators and portfolio constructors working for mainstream Belgian financial institutions that use third-party funds.

In addition to a bullish stance on infrastructure, property funds and private equity are very positive too.

The strongest equity buying appetite is reserved for Asia ex-Japan equities and European equities are not far behind either (this is largely in line with the rest of Europe).

US equities and developed market government bonds (govvies) are at the bottom of the rankings and have the most sellers.

Japanese equities are also out of favour right now.

Our Belgian respondents’ keenness for equities is very much geographical.  While they are still interested in buying more European and Asia ex Japan equities, demand for US, global emerging market and global equity funds has declined.

US impact

According to one of the biggest asset managers in Belgium, Candriam Investors Group, the US election could be a positive catalyst for Europe – assuming the Democrats are elected.

And any important news regarding the vaccine should also act as a positive factor.

On the other hand, the strained relations between the US and China, coupled with a rise in new infections across Europe, has and will continue to weigh on market sentiment.

On the whole, Candriam conforms to EI Future Flows survey’s findings – that it is more positive on Europe than the US.

In its August insight report, Candriam suggested Western Europe should outperform the US even though its lockdown was more severe and its peak-to-trough fall in GDP larger.

“The region has managed its re-opening successfully and has broken the chain that links mobility and the virus. By contrast, data in the US show that this link has not yet been broken in most states.”

The report adds: “Better crisis management in Europe translates into better prospects for GDP recovery. In addition, the growing Value gap in Europe coupled with a Democrat victory in the US should also help Europe to outperform.”

Yves Ceelen, head of institutional portfolio management at Degroof Petercam Asset Management, has a firm focus on the US Election too and its potential impact on global markets.

“Will another four years of a Trump presidency accelerate the downfall of the US’ hegemony? Can Joe Biden and his successor prolong US dominance and promote democracy and freedom?

“It does not seem too late yet, but the clock is ticking. While US companies are still leaders in their field, and firms like SpaceX show the strength of US technology, political influence is waning.”

Value preference

In general terms, Belgian investors have a slight preference for large cap over small for all three asset classes, and value over growth when it comes to European and US equities.

Candriam intends to keep its high conviction on value stocks – particularly financials. The view is that they still offer an excellent risk/reward ratio.

The asset manager points out that valuations for banks are close to 2009 levels for certain names; but, unlike the 2008 financial crisis, banks now have sufficient equity to cope with the shock.

According to EI’s Future Flows, buying demand for absolute return and hedge strategies has generally declined.

There are plenty of buyers around for commodities, property funds and passive products.

But multi-asset and convertible bond funds are not on the radar of portfolio managers right now.

David Burrows

For more than 25 years, Dave has written for a wide range of newspapers and broadcasters including The Times, The Financial Times, The Independent, The Wall Street Journal, The Mail on Sunday, Reuters...

Part of the Mark Allen Group.