Interview Olaf van den Heuvel, European Head of Tactical Asset Allocation

Could you tell us something about your (financial) educational background?
I have been interested in investing from a young age. I started to study economics in Tilburg, specifically, in the direction of monetary economics. When I graduated, there were a lot of starter positions, but Aegon was the best match for me. So, I started in 2000 at the strategy desk where I was responsible for our outlook on the Japanese markets. I found out that your educational background is not as important. Around 75% of my colleagues have a more technical educational background such as chemistry or physics. Having a genuine interest in the field is very important. During my studies I didn’t go on exchange, which I regret. I think that extracurricular activities like exchanges are very useful and interesting.

What positions did you fulfill during your 17 years at Aegon Asset Management?
After my job at the strategy desk, I fulfilled a position within the American equity team, a good experience in this very efficient market. In contrast, I have also worked within the Pacific equities which are much less efficient than the American market. Currently, I am the European Head of Tactical Asset Allocation for more than 10 years.

Could you tell us what an average working day looks like?
As European Head of Tactical Asset Allocation, I coordinate two teams which are located in Edinburgh and in The Hague. I start the day with looking at the US and Pacific markets. At 10 AM I have a conference call with my two teams during which we discuss macroeconomic events and evaluate our portfolios. Every team member has a specific focus, such as FX or the infrastructure industry. The teams discuss what happened within their specific sectors and give advice if we need to act on these events. Actually, we are keeping track of what is happening in the market throughout the day and discuss with each other if and how we should react. The rest of the day our teams are busy with implementing the ideas we have discussed.

What does the investment process of Aegon Asset Management look like?
At Aegon Asset Management we offer various products to our clients, but we are mainly focussed on pensions. We need to invest the incoming funds for our clients and therefore we need to determine the optimal mix across different asset classes. We determine this optimal mix for the long- and the short-term. Across Aegon Asset Management we have different teams that are focussed on specific asset classes such as high-yield securities and corporate bonds. These different teams are responsible for the asset allocation within these asset classes.

“I use a long-term approach as I face two supervision regimes that make it very challenging for me to invest in the short-term.”

How does Aegon Asset Management act on macroeconomic events?
In some cases, we need to act on a daily basis. For example, when the ECB publishes a negative future outlook about inflation, we have to act immediately and could short the euro as a reaction. Normally we create various scenarios to position for macroeconomic events. Another example was the US presidential election. As you might know Aegon has a strong presence in the US, where the largest part of the company is located. Some of my colleagues there were convinced that Trump would become the president of the US. That morning, the S&P 500 decreased with 4% and my colleagues immediately bought call options on the S&P 500, as our studies showed that a fully democratic or republican house would be good for the stock market. In addition, one of Trump’s plans was to lower corporate taxes which increases the profits of the US corporates in turn positively affecting the US stock market. In the end our strategy turned out well for Aegon Asset Management.

Does Aegon Asset Management use passive management or active management?
Aegon Asset Management considers itself an active investor. Although we are convinced that markets are efficient in the long run, there can be short term inefficiencies that we can capture. Also, increasingly our products are not linked to an index but rather try to achieve a certain goal, e.g. a 5% income yield. That 5% then becomes the benchmark instead of an index. Of course, a part of our portfolios is invested with a passive approach.

Do you also invest in your personal life?
Yes, I definitely invest for personal purposes. As mentioned before, I am interested in investing and it is actually one of my hobbies. As an investor for personal purposes and I think that I am a diversified investor. I mainly invest in fixed income, equities and mezzanine loans and use a long-term approach as I face two supervision regimes that make it very challenging for me to invest in the short-term.

“It may be a cliché, but I think that the most important thing is that you find a job that you like.”

What was the biggest learning moment in your career?
I have learned that in every cycle investors face bubbles which are mainly caused by irrational investors. Historical data shows that a small recession will occur every six to seven year and a big recession is likely to occur every 25 years. If you see that it went well for a longer period of time, you should just cash out, not trade and wait till the bubble bursts. I expect that the next big recession will happen between 2030 and 2040. However, we also expect a (small) recession for the US in 2018-2019, mainly because the amount of outstanding loans has grown rapidly since 2010. If interest rates slowly increase a lot of parties can get into trouble.

Do you have any advice for starting investors?
When I started my career I immediately noticed that your educational background forms a solid foundation for your career, but that it is not necessary that it matches directly. For me this was a great eye-opener. As mentioned before, the educational background in Aegon Asset Management is very diversified and this makes working with them even more interesting. Moreover, every colleague is very passionate about investing and that keeps our job fun! It may be a cliché, but I think that the most important thing is that you find a job that you like.