Monday 7 July 2014 


With Belgium and France having had to leave the football world championship in Brazil, media reports talk of a surge in last-minute holiday bookings: those still taking part in the World Cup don’t count when your team is no longer playing. So losing a game can be bad for economic growth: it weighs on consumer morale, sales of paraphernalia slow and the trade balance deteriorates because people leave on a holiday. 

In a meeting with the management team of our human resources division, I present the business and HR implications of the market environment. The blend of structurally low interest rates coupled with low economic risk indicators and rich valuations will likely push investors towards actively managed strategies with a higher tracking error: high alpha (high excess return) will have to make up for low-beta (= index) returns. The ‘the winner takes it all’ phenomenon in terms of inflows looks set to become even more pervasive. From an HR perspective, talent management as well as the ability to handle underperformance should be more important than ever. Indeed, when the tracking error is high, sudden changes in the dominant market theme can affect short-term performance considerably. 

Tuesday 8 July 2014 


I take part in an interview with Reuters TV on whether investors are complacent. Yes, the answer is, to some degree they have with respect to geopolitical risk, but the earnings outlook still justifies owning risky assets. Nevertheless we have recently changed our equity overweight to a neutral position considering that investor sentiment is now too positive and that we don’t see any near-term catalysts that can push markets higher. In the evening, I arrive at my hotel where I see a lobby filled with works of art. The statue of a man walking with a Belgian flag on his back (remember there is a World Cup going on), another one with a Dutch flag. A third one is in horizontal position, resting on his elbow. There is a Brazilian flag draped over him. Later I have dinner in the hotel restaurant. On Twitter, I see Brazil-Germany is 0-1. Half an hour later I switch on the TV in my room and it’s 0-5. I can’t believe my eyes. The person who had put the Brazilian flag on the statue in the lobby knows something about football. 

Wednesday 9 July 2014 


I’m guest host on CNBC's Squawkbox. The topics are very diverse: the exit polls of the Indonesian presidential elections show a slight lead for Joko Widodo. Equity investors are holding their breath because the market has had a nice run this year on expectations that Widodo would win. The CEO of a software company is another studio guest. His company develops a product which incorporates how high-frequency trading algorithms work into traditional risk analysis and stress tests. Food for thought.

Thursday 10 July 2014


In the monthly call with the investment team heads, I can’t stop myself remarking to my Brazilian colleagues that their team’s defeat in the match against Germany is not exactly going to help consumer confidence, which was already declining. They have a bearish view on the economy, but the equity market is driven completely by views ahead of the October presidential election. Our portfolio manager for Japan expects changes in the asset allocation of government pension funds and possibly private-sector pension funds as well as share buybacks to result in considerable inflows into the stock market. Our head of Chinese equities emphasises the importance of the Shanghai-Hong Kong stock exchange connection, which will allow foreign investors access to A-shares without obliging them to request their own quota. He believes this could be a wake-up call, considering the generally cheap valuations on the Shanghai market.

Friday 11 July 2014


In my monthly call with our CIO Listed Real Estate, he emphasizes dividend yields in Europe are still attractive (close to 3.7%) compared to equities in general and certainly compared to bonds (although the latter are less risky of course). Within Asia, Japanese real estate is attractive because of its supply/demand situation which will boost rental income.


William De Vijlder

Vice – Chairman of BNP Paribas Investment Partners