Managers ditch Europe in favour of America and Japan
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Fund managers have ditched European equities in favour of America and Japan, according to the Bank of America (BofA) Merrill Lynch Global Fund Manager Survey for March.
The survey found that 21% of managers are underweight European equities, compared with 2% who were overweight in January. Most of the money went into American equities. About 19% of the managers said they were overweight American equities - up from 1%.
Japan has also gained popularity. While a net 10% of global managers were underweight in January, 6% were overweight this month. This is the most bullish level since August 2007 and the first time investors have gone overweight since July 2008. (article continues below)
Gary Baker the head of European equities strategy at BofA Merrill Lynch Research, says fund managers are less concerned about Greece. Yet European country risk remains “a key constraint to optimism over economic recovery”, he says in a statement.
Fund managers are more willing to embrace corporate risk, via equities, than sovereign risk, says Michael Hartnett, the firm’s chief global equities strategist.
In March a net 46% of asset allocators were overweight in equities, up from 33% in February, while cash levels dropped to zero compared with a 12% overweight stance in February.
Meanwhile, there was a fall in managers who expect core inflation to rise over the next year, plunging from a net 46% in February to 34% in March.
According to the regional survey, 45% of European fund managers expect the region to grow over the coming 12 months. In January, 72% of them forecast growth.
Although American equities have surged in popularity, optimism among American fund managers has fallen, with 43% expecting the American economy to grow - down from 76%.
The latest findings suggest that 60% of European fund managers and 72% of American fund managers expect earnings to improve over the coming 12 months. Both have reduced their cash levels.
The findings of the global survey are based on the responses of 207 fund managers, managing a total of $589 billion (£388 billion). Some 165 fund managers with assets of $403 billion were polled for the regional survey. BofA Merrill Lynch Research and TNS, a market research company, conducted the survey from March 5-11.
