Norwegian diversification attracts Belgians
Belgian investors looking for fixed income opportunities have been making a beeline for Norway, according to BNPP IP.
Having taken in some €250m in the three months to March, the snappily titled BNP Paribas B Fund II Basket of Norwegian Bonds III – and its precursors – have become BNP Paribas Investment Partners’ biggest selling funds in Belgium.
It is the result of a number of factors. Traditionally cautious Belgian investors have seen appealing fundamentals in Norway. As eurozone-based investors, they are acutely aware that the universe of European developed market fixed income securities has undergone a period of considerable volatility and depressed yields.
And it reflects a successful application of what BNPP IP refers to as its ‘local-to-global’ way or projecting local expertise and products from one market into another.
“What we’ve seen in the Belgium market is specific interest in anything that could be termed a ‘carry product in fixed income’,” says Kristel Cools, head of Group Networks Belgium at BNPP IP.
She co-ordinated and facilitated the product launch in Belgium, following discussions with local Nordic partner Alfred Berg towards the end of 2011.
Belgian investors are aware that they have had good performance on normal open-ended fixed income funds for years because of the trend in interest rates.
But now they are looking to the future and wondering how to maintain portfolio performance without taking too much risk, Cools says.
This has resulted in the fund’s buy and hold open-ended fund concept. The bonds in the portfolio mature before the maturity date of the portfolio. This means that clients get an indication of the portfolio yield, based on the yield to maturity on the bonds when bought.
Assuming no defaults in the portfolio, then the notional €100 invested is returned with a coupon in between. It is a model that has been used for three years.
Cools says: “We previously did a lot of euro-denominated portfolios or dollar denominated portfolios.
“But in Belgium there was a clear demand for other currencies, such as the Norwegian krone. It has always been interesting in Belgium because Norway has a very different economy from the rest of the eurozone.”