The attraction for Belgian institutional investors of investing through funds is understandable. The Belgian market is a small one, and the size of the average pension fund makes investment funds the easiest and quickest way of achieving portfolio diversification.
Also there are good fiscal reasons for investors taking this indirect approach to investment that attracts around 70% of total institutional assets in a country where only institutions are obliged to pay a tax on direct investments.
However, and after two years of bad investment returns, investors are becoming more and more concerned about the benefits of investing through funds and the cost.
“When you are getting returns of –5% management fees become extremely important, and this is why investors are now more concerned about costs than they were before,” says Karel Stroobants at VKG in Brussels.
The Belgian press has recently been covering the fact that some of the big Belgian fund management names have been increasing the management fees of their Sicavs in the recent past. “Institutions in Belgium use Sicavs a lot and they are concerned the lack of transparency of these vehicles,” says Yves Van Langenhove, head of investments at INVESCO in Brussels. “The transparency about fee structures in mutual funds must increase so people can see all costs that are now hidden.”
At Conac, partner Paul de Smet says: “Up until now the fiscal advantages of investing funds and the good investment returns made investors not too think too much about management fees. But now more and more people are becoming quite critical towards these fee structures.
“However, I don’t think investors’ concerns are so serious that they will force them to withdraw money from these funds,” de Smet adds. “Funds will continue to be the preferred way to invest among Belgium investors, because they can obtain immediate diversification and simple administration.”
Fund managers are aware of this concern among investors and the way they are dealing with it is with transparency and communication. “We always show the client the fees we apply to our Sicav vehicles before they ask for them,” says Francis Heymans, director of sales and marketing for institutional asset management at Petercam. Heymans continues: “We know we are cheaper than most of the other asset managers and we know investors are very sensitive about this subject at the moment. But they are right, they have to look deep into the total management costs because 1% up or down can make a big different when it comes to total returns.” He adds: “More and more investors will come asking about these numbers and you have to be totally transparent.”
At one of the large investment houses, Paul Beller, head of institutional business development at KBC Asset Management, also believes in the increasing transparency in the Belgian fund management industry. “KBC, and I believe most of our competitors, are completely transparent about management fees. We know that costs in Belgium are very important, maybe more important than in other European countries and we are open to discuss anything to do with costs with our clients.”
However investors concerns are not just about transparency and, to be fair, most institutions agree that in most of the cases getting information from managers is becoming easier.
The real problem is that, now efforts are being made to improve information and reporting regarding fees, investors are not happy with what they see.
“It is true that most of Belgium’s largest fund manager are more expensive than the smaller ones and this is linked to the high cost involved in their distribution networks. Open architecture in fund management comes at a cost,” says Petercam’s Heymans.

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