KBC Asset Management views recent improvements in Hungary's political environment positively, but stresses that political sentiment by itself is insufficient for making investment decisions, Johan Lema, CEO of KBC Asset Management, told Portfolio in an interview.
Lema noted that the KBC group has long-standing ties to Hungary and operates there through K&H Bank. He described signs of change: the country appears more open to cooperation, including toward Europe, and KBC believes European integration can create value for Hungary. Still, from an investment perspective the decisive factors are fiscal and monetary policy and whether the country creates a predictable environment in which companies can operate successfully. Greater predictability would be a clear positive signal for markets.
KBC currently holds a neutral stance between equities and bonds: the two asset classes meet different investor needs. Lema emphasized that Hungary offers opportunities to build companies that can compete internationally, and a more predictable policy environment could also support the domestic bond market.
Interest-rate outlook and government bonds
Lema declined to make firm forecasts about yields but said KBC expects global rates to remain structurally higher for a longer period. He pointed to global and regional developments that could keep rates elevated and warned that new shocks might push yields up further, while easing geopolitical tensions could allow some decline. The ten-year Hungarian government bond yield traded around 5.4 percent this year, and while further declines over a six- to twelve-month horizon are possible, he would not commit to a specific prediction.
KBC does not regard attractive government bonds as unfair competition. Lema argued that a government bond represents a single issuer and market, whereas active fund management is about diversification across assets and markets. Distortion could occur if a government offered persistently non-market-standard yields for an extended period, but KBC sees recent high yields as time-limited.
Household savings, market participation and the financial industry
European households still hold much of their savings in bank deposits and participate less actively in capital markets than Americans. Lema attributed this to cultural and historical reasons but also held the financial industry partly responsible. He said the sector often focuses on technical details—"talking about the engine instead of the car"—which can make investing seem overly complex to clients.
Greater retail participation would channel more capital to companies, stimulate the economy, create jobs and wealth. KBC and K&H aim to lower entry barriers, promote financial education (including in schools) and encourage small, regular investments that help clients overcome prejudices about investing being gambling or requiring large sums and specialist knowledge.
Lema also said the European Capital Markets Union objective of directing more European savings toward European companies makes sense. However, he stressed that asset managers must act in clients' interests: if U.S. tech stocks offer better opportunities, client capital will flow there regardless of nationality.
ETF launch to reach new client segments
In April of this year KBC launched its first ETF. Lema explained the product was introduced primarily to reach a younger, more self-directed client segment that often learns via social media and prefers digital channels over branch visits. This client group commonly requests ETFs and cryptocurrencies; the ETF offering is intended as a complementary solution rather than a replacement for active management. ETFs can be advantageous for active traders because they trade intraday, whereas long-term investors may value other product features. For KBC, ETFs expand the product range and help attract new clients.
Artificial intelligence in investment processes
KBC has used data models and machine learning for years, and since 2020 it has deployed AI solutions that come very close to making investment decisions. Human oversight remains in place—experts monitor model performance—but some funds today operate with AI models participating at varying degrees in portfolio management. According to Lema, KBC now runs funds that manage real client money with AI-involved processes.
Lema said he is an enthusiast of language models: KBC uses Microsoft Copilot, which he estimates saves him several hours of work each week by extracting key points from long documents tailored to his role. He believes AI can multiply cognitive capacity in a manner analogous to how the industrial revolution multiplied physical power, and sees long-term multi-decade trends in AI and the infrastructure around it.
While AI will change roles, Lema stressed it will not make people redundant in asset management. Portfolio managers are likely to shift toward designing, training and supervising models, and to act more as trend-watchers. In markets or niches with limited data—emerging trends or new asset classes—human expertise will remain indispensable.
Scale advantages combined with local presence
On Hungary-specific operations, Lema explained that K&H operates as an independent bank, while investment management is provided by the Hungarian branch of Belgian KBC Asset Management. The key benefit of this setup is economies of scale: about 70–75 percent of the assets managed by KBC are in Belgium, and that scale allows KBC to offer a broader product range and more advanced risk-management and IT capabilities in Hungary than a standalone local manager might sustain. At the same time, a local branch is necessary to stay close to K&H and Hungarian clients so the firm can respond to local needs. International scale and local presence reinforce each other.
This article does not constitute investment advice or a recommendation.
