The sources for these conclusions are the Bank of America Merrill Lynch (BofA ML) Fund Manager Survey, backed up by an independent, monthly fund manager research carried out by Skandia. The fund buyer views are those of the 40 high-end wealth manager delegates at Portfolio Adviser Congress held at The Villa Padierna Palace in Benahavís, Spain, in mid-September.
US up / Europe up more
Starting with the areas of agreement, both are scaling back their positive sentiment to US equities, to neutral rather than overweight, while their sentiment for Europe is moving in the opposite direction.
At PA Congress, just 13.8% of delegates are going to up their allocation to US equities in the coming 12 months, with 38.9% keeping it as it is currently and 47.2%; decreasing it. A majority of fund managers are still positive on the US though the degree to which they are positive has fallen from its July peak.
Both buyers and managers are bullish on European equities with the BoAML survey of 235 fund managers showing them to be more positive than any other time since June 2007. More than half of the delegates at PA Congress are going to increase their European exposure in the coming year, with none at all looking to reduce it.
Obvious what to blame
Earlier this week, Will Jackson, online editor of Expert Investor Europe, a fellow Last Word Media publication, wrote: “This rotation from US to eurozone equities appears linked to protracted negotiations over the US debt ceiling, which additionally damaged confidence in the global economic recovery.”Meanwhile, Michael Hartnett, chief investment strategist at BofA ML Global Research, wrote: “Events in Washington clearly caused investors to shift back towards their benchmarks, but asset price gains can still be driven by high cash levels.”
Negotiation hangover?
Now these negotiations are complete – or pushed back to early February when they will undoubtedly start up all over again – it will be interesting to see if the damage has been done with both groups continuing to give the US the cold shoulder.
The summary comment on Japan is that everyone loves it. The fund groups have been on an upwardly positive trend for the past 12 months, while nearly 40% of PA Congress delegates are looking to up their weightings in the next 12.
It is Asia and emerging markets where there are distinct differences. The Skandia fund manager survey, of 18 fund groups, shows them to be negative on their 12-month outlook for Asia whereas 40% of wealth managers are looking to invest more money there.
As far as emerging markets are concerned, the fund groups’ outlook has been falling to neutral since the summer while 28.6% of portfolio managers are going to keep their allocation the same, with 60% increasing their allocation.
The conclusion to all this is that there are a number of fund groups out there promoting their emerging market and Asian equity capabilities – and have been since First State and Aberdeen discouraged new money into their multi-billion pound funds. With the equity market sell-off in May a distant memory, these proactive groups could steal a tactical march as wealth managers are now looking to get back into the GEM/Asian market.
