Luxembourg-domiciled Ucits investment funds for retail investors have become the most widely used funds in the Belgian market, the head of Belgian asset management association Beama said on Wednesday.
Presenting an overview of the state of the Belgian fund market at the 2023 Trends Investment Summit, Johan Lema said that domestic market now almost entirely is made up of Ucits funds as non-Ucits funds, such as Alternative Investment Funds, have all but left the market.
“The Luxembourg wrapper has taken over from the belgian wrapper,” Lema told delegates at the conference at Brussels airport. “Belgian funds used to dominate but that trend has changed.”
’We go for Ucits’
It’s clear, he said, that Belgium now is a Ucits market. “We go for Ucits,” he said. “Non-ucits have all but left the market, We only have Uclts left on the Belgian market.”
Lema said that while fewer Belgian-domiciled funds are available for investors, those that are still around have been attracting more funds. “We see the number of funds decreasing year after year and as the assets grow funds actually become biggers.
In Efama’s ranking of Europe’s top fund domiciles, Belgian ranked 9th with assets under management of about 417 million euro at the end of 2021. Belgium is home to 63 asset management companies. Luxembourg and the Netherlands respectively host 246 and 106 firms, according to Efama.
’Healthy trend’
“The long-term trend is still very healthy. Funds are where clients go to invest. That growth, even last year, was faster than the overall growth in household assets that we hold in Belgium,” Lema said, adding that with a market share of about 16 to 17%, domestic fund holdings in Belgium are considerably higher than the European average.
“Belgium is a real funds market,” he said.
The market challenges, with rising interest rates and geopolitical instability, have not led to outflows. Belgian funds saw some 9 billion in inflows last year, he said.
Growth in institutional fund classes was faster thn growth in retail, according to the Beama chief.
Like other European fund markets, the asset management industry in Belgium is also seeing a drive to become more efficient.
MMF and bond funds seen growing in 2023
Looking ahead to this year, he said the backdrop of rising interest rates will make money market funds and bond funds more important. “We expect that in 2023 the strucutre of the market will change again based on the changing rate environment. MMF and bond funds play a more important role.”
Addressing sustainability, Beama data shows that “more than 70%” of the Belgian market now consists of Article 8 or Article 9 funds as classified under the Sustainable Finance Disclosure Regulation, or SFDR. About 10 percent of Belgian funds remains to be classified.
Asset managers across Europe in recent months have actively reviewed the SFDR classifications they have assigned to their funds. This has led to a wave of reclassifications, also known as downgrades, after European regulators told investment fund managers to be more careful about their sustainability funds.
Lema said that Belgian fund market has not seen such a wave reclassfications. “We do not see that in the data. It is pretty stable,” he said.
About 43 percent of Belgian funds now has adopted the “Towards Sustainability” label, a sustainability label introduced about three years ago by the industry in Belgium. In 2018, only 10 percent of funds had that label.
Further growth is expected for pension savings funds, a widely used domestic product. These funds are 100% sustainable in Belgium. “Pension savings remains a growth story in Belgium,” Lema said.