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Portuguese fund buyers undisturbed by equities sell-off

Fund selectors in Portugal are far from concerned by the world’s equity markets’ rough start to the year. To the contrary, they see the current weakness as an opportunity to further increase their still relatively low exposure to equities.


PA Europe

While the recent shaky condition of the equity markets has left many with an uneasy feeling about their equity allocation, this is not the case for Portuguese investors. When our researcher visited Lisbon at the end of January, he found the local fund selector community in a defiant mood.

None of the fund buyers he met will decrease their overall allocation to equities. They are instead looking to increase it, albeit from relatively low levels. Most interviewees are currently overweight equities, but in Portugal that means an exposure of just 15-25%, which is much lower

than in most of the rest of Europe. The majority of the country’s investors are planning to increase this ‘overweight’, as they consider the current market sell-off a window of opportunity. The consensus in Portugal is that markets are currently driven by sentiment rather than by economic fundamentals.

José Luis Borges, head of of institutional portfolios at BPI Gestao de Activos in Lisbon, has kept his allocation to equities steady during the recent market turmoil. “But we have a preference for slightly conservative funds that are tilted to growth companies,” he says.

However, the macroeconomic outlook of Portugal’s investors is not as rosy as might be expected based on the above. The reason for this is the recent installation of a left-wing government in the country, which is feared to take a less market-friendly stance than the previous centre-right government. As a consequence, the interviewees fear Portugal’s fiscal position might deteriorate, which would make it less likely for the country to regain the coveted investment-grade status.  

Rock solid faith in Draghi

European equities have been the most popular asset class with Portugal’s fund buyers for two full years now. However, this doesn’t mean that their allocations to the asset class are now huge. According to the Portuguese Investment Management Association APFIPP, less than 2.5% of total assets managed by Portuguese professional investors are invested in European equity funds.