Net assets for capital-protected structured funds in Belgium decreased by €0.06bn, or 0.64% during the final quarter of 2016, according to the latest quarterly figures released by the Belgian Asset Managers Association (Beama). Capital-protected funds represented a capital of €9.25bn on December 31, 2016 (5.22% of the total Belgian fund market), with €8bn of outstanding assets linked to equities and €1.25bn linked to interest rates, loans and currencies.

Assets under management (AUM) for capital-protected funds, which reached a high of €42.7bn at the end of 2006, have since seen a steady decline, and, according to Josette Leenders (pictured), director asset management & private banking and director general at Beama, this won't change anytime soon. "Prospects for capital protected funds are not great at the moment, mainly due to the low interest rate climate but also because of the particular investor tax which is applicable to these products," said Leenders. "The number of capital protected funds keeps on falling in the Belgian UCI (Undertakings for Collective Investment) sector and at Beama we believe that this will continue for some time."

There were 13 structured funds worth €482m added to the SRP Belgium database during the fourth quarter of 2016. A grand total of 50 structured funds, which, without exception, were all distributed by KBC, had strike dates in 2016. Of these, KBC's Perspective Solid Companies 90 Timing USD 5 was the best seller. The five-year fund which is linked to a basket of 30 stocks collected €77m during the subscription period.

Net assets of funds that primarily invest in fixed income securities recorded a decline of 9.8% during the fourth quarter. At the same time net assets of funds that mainly invest in non-fixed income securities, such as balanced funds and equity funds rose by 9.7% during the period.

Money market funds, which decreased in one year from €18.5bn on December 31, 2015 to €4.4bn on December 31, 2016, noted the largest absolute decline (-45.2%) in the quarter due to net outflows. "Monetary funds are partly influenced by an 'off setting' technical effect," said Leenders. "Within the 'balanced' funds which pursue a technique of floor protection, as soon as the climate in the stock markets becomes more uncertain, there will be a switch to monetary funds (retaining the net-asset value prevails)." When the financial markets perform well the fund manager will reduce the investment in monetary funds in favour of the purchase of stocks, according to Leenders. "Hence monetary funds can show a somewhat contradictory image."

AUM of publicly distributed funds in Belgium, which stood at €172.7bn at the end of 2015, experienced a temporary decline in the first quarter of 2016 before slightly recovering during the second and third quarter. In the final quarter a stark increase was noted and by the end of 2016 net assets in the Belgian UCI sector as a whole were 2.6% higher than a year before - boosted mainly by net subscriptions - leaving the 'all time high' of end 2006 (€179.1m) within reach, according to the association.

"The circumstances are positive," said Leenders. "The low interest rate directs the investor towards products which are able to offer a higher return than the ordinary savings account (negative return if inflation is taken into account)." Due to the diversification, which is an important characteristic of collective investment funds, the saver is still able to oversee the risks involved, according to Leenders.

"The risk adverse reactions versus the stock markets that were still very present immediately after the banking- and government debt crisis have been behind us for some time now," said Leenders. "Even younger investors are now investing in funds, which is reflected, for example, in the pension savings funds (third pillar)."

Sales of capital protected structured funds, at €1.3bn, made up 25% of the Belgian structured products market in 2016. Securities, with sales of €2.8bn, had a share of 54% of the market with the remaining 21% made up by Class 23 life insurance products (€1.1bn).

Click the link to view the figures for the UCI-sector fourth quarter 2016 (Dutch / French).

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