A year after the launch of Belfius Investment Partners, the investment arm of major Belgian bank Belfius, InvestmentEurope sought an update from chief investment officer Michel Hubain (pictured).
Belfius, one of Belgium’s largest retail banks, and Belgian investment firm Candriam have something in common – their past.
Both companies were “born” from the dismantling of the former Dexia group, and now it is the future of Belfius Investment Partners, the investment subsidiary of Belfius, that binds them.
Belfius IP was set up on 20 May 2016, and received authorisation from local regulator FSMA two months later.
Before the launch of Belfius IP, the bank historically partnered with Candriam for the management of its funds of funds.
However, Belfius has pushed to establish its own asset management business; it has been keen to enlarge its own product and service range, and the FSMA wanted banking institutions to maintain closer control of delegated activities.
Nevertheless, Candriam remains the privileged partner of Belfius IP, which currently tallies 11 employees, until 2021 at least.
“Belfius IP is looking to repatriate, progressively, funds of funds that are managed externally by Candriam. But as Belfius IP consists of a small team we have maintained the delegation of management contracts to Candriam. We have an investment management agreement with the firm,” explains Michel Hubain, chief investment officer of Belfius IP.
“This means Belfius IP is the management company of the FoFs, but the investment management remains delegated to Candriam. Only collective management activities fall into the scope of the agreement. Overall, some €18bn of assets are managed for us by Candriam.”
IN-HOUSE FUND SELECTION
The manager has set a target of €20bn of assets under management by the end of 2017. To achieve that, it has started to develop in-house managed funds.
The new products are distributed by Belfius bank, which has 3.8 million individual clients.
“In October 2016, we launched the Belfius Global Sicav, which is composed of three compartments, in which volatility is managed at different levels (low – 5%, medium – 8%, high – 12%). The goal of these funds, selecting ETFs and trackers only, is to optimise yield in all sub-asset classes through a flexible allocation process and taking risk into account. We currently manage around €800m of assets in this Sicav,” says Hubain.
Belfius IP launched another Sicav, Belfius Multi Manager, at the end of January 2017, which is composed of two sub-funds, Defensive and Defensive Opportunity.
“The former is primarily invested in third party fixed income funds with volatility of 0.5% to 2% and little risk. We do hold flagship funds from asset managers like JP Morgan and BlackRock. The second compartment, for which we also operate fund selection, can be invested up to 20% in equities.
“At least 80% of the fund is invested in fixed income strategies that have limited maximum duration. We favour funds with duration less than three years,” Hubain notes.
Quantitative and qualitative criteria monitored for fund selection include fund size, Sharpe ratio, three-year track record, and stability of the portfolio management team.
“We want our funds of funds to be decorrelated and try to identify and select some strategies that could improve our risk-adjusted return,” he adds.
When asked about BlackRock’s partial shift from human portfolio management to quant, Hubain says active managers will continue to have their say over the long term.
“We don’t believe that active managers will be fully replaced by robots over the long term. Active managers will still have their place. Quantitative management has always worked efficiently when trends were clear in the markets. When trends become blurred, quantitative managers exhibit difficulty in anticipating trend reversals.”
Hubain suggests that some three to four funds could be launched by Belfius IP annually.
“SRI is an emerging trend among Belgian investors. Belfius has SRI in its DNA. Demand is also increasing for specific themes like smart energy and water strategies,” he concludes.
This article was first published in the June 2017 edition of InvestmentEurope.