market insight belgium 2014 q1

At our Brussels conference in January 2013, just a third of the room was upbeat on the prospects for global growth.

Yet there were clear consensus views on asset allocation: more global equities and emerging market bonds; less developed world sovereign and corporate debt.


In contrast, when our researchers visited Brussels and Antwerp in the fourth quarter, more than half of the private banks, wealth managers and pension funds they consulted were positive on the 12-month outlook (see chart 1).

However, levels of enthusiasm for almost every major asset class had fallen since the start of the year, with only high yield and absolute return growing in popularity.

Western stocks

Investors favour Europe over US

In developed world equities, there was a marked shift away from the US, while appetite for Europe moderated somewhat (see charts 2 and 3).

Interviewees were confident on the US growth picture and largely unperturbed by the country’s debt levels, but many worried that US-listed companies had become overvalued, following a year-to-date gain of some 25% for the S&P 500 Index.

The handful of investors who planned to increase their US equity exposure favoured value strategies over growth.

Fund selectors similarly feared that European stocks would struggle to sustain their performance in 2014, with some forecasting single-digit returns – compared with about 15% last year.

Yet many remained overweight the asset class and considered valuations attractive, particularly in relation to the US.

Japanese equities

Little appetite despite strong returns

Stellar performance from Japanese stocks failed to stoke appetite in Belgium, meanwhile.

The share of fund selectors planning higher Japanese equity weightings was flat throughout 2013 (see chart 4), and interviewees said they were unwilling to invest the time needed to properly understand the market.

While they anticipated strong economic growth next year, there was wariness over the impact of a three percentage point hike in Japanese consumption tax, scheduled for implementation in April.

Some investors also expressed disappointment that prime minister Shinzo Abe’s much-vaunted economic reform programme had apparently failed to bring about a cultural change in Japanese companies.

Emerging market stocks

Asia ex Japan maintains its popularity

Appetite for Asia excluding Japan was robust, however, with about a third of our interviewees planning to increase their exposure to the region – a similar proportion to that recorded at the Expert Investor Belgium event (see chart 5).

While Asia was strongly favoured over the broader GEM category (see chart 6), investors remained upbeat on the long-term outlook for the developing world, noting that countries in the region were less indebted than Western nations and had greater scope for economic growth.

Global bonds

Unconstrained strategies are in demand

Interviewees expressed little appetite for fixed income, and Belgian fund selectors are likely to pull money out of strategies focused on Western sovereign debt, investment grade corporate bonds and emerging market credit during the next year.

This marks a reversal of fortunes for EM corporate bonds in particular, given that a net third of investors at Expert Investor Belgium planned higher weightings.

In the fourth quarter, a net 19% expected to reduce their exposure to the asset class (see chart 7).

In contrast, demand for EM sovereign debt fell sharply but remained in positive territory.

A net 6% of interviewees planned to increase their allocations, with private bank and wealth manager fund selectors focusing on local currency exposure, and pension managers favouring hard currency strategies – a ploy which enables them to take additional risk elsewhere in their portfolios.

The only area of fixed income to become more popular in aggregate was high yield (see chart 8), with interviewees favouring exposure to bonds issued in the US, rather than Europe.

Looking across fixed income more broadly, fund selectors were upbeat on unconstrained, low duration strategies.


Absolute return funds will see inflows

Half of our interviewees planned to increase their absolute return allocations over the following 12 months, and none expected to reduce their exposure.

While this represented a sharp rise from early 2013 (see chart 9), it was in line with the growing appetite for such strategies recorded last year by Expert Investor Europe in many continental markets.

Elsewhere in the alternatives arena, Belgian fund selectors were upbeat on non-market cap weighted ‘smart beta’ indices, as well as convertible bond and long/short products.

Ilyes Bdioui and Ashley Castellini, members of EIE’s research team, collected the information in this document through a series of interviews with senior fund selectors and asset allocators, plus publicly sourced data.

For more information, contact Ilyes at or on +44 (0)20 7382 4470.

Click here to see upcoming Expert Investor Europe events in Belgium.

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