Global fund managers shrug off Europe fears, finds S&P

S&P Capital IQ has found almost two-thirds of global equities fund managers are overweight Europe ex-UK, rejecting concerns over the state of the European economy.

The latest global equities sector trends report found 62 per cent of global fund managers were overweight the region in October.

The report also revealed a larger number of fund managers were underweight US equities, with just seven funds holding more than 55 per cent in the US, with the average global fund manager holding around 40 per cent exposure.

S&P Capital IQ Fund Research director L-J Coffin says there were few surprises, with asset management groups and fund managers interviewed believed a stock pickers’ market existed, with asset allocation also an important factor in portfolio construction.

Coffin says it is not difficult to underweight the US equity market a it constitutes a large weighting of the MSCI All Countries World index (48 per cent) and the MSCI World index (60 per cent).

The average 40 per cent related to the strong performance of IT companies, many of which are US-based.

Coffin says the most extreme underweight for the US in a global fund was around 20 per cent.

As well as Europe, Coffin says Asia ex-Japan was a favourite area for global managers. Only one fund group was in line with benchmark weightings for Japan, with the rest of the funds underweight.

“People are more bullish [about Asia] despite nagging doubts about China,” she says.

Analyst Susan Sworn adds: “The rationale remained that in developed markets better corporate governance prevailed, large-caps were still cheap relative to small-caps and that a holding with multinational emerging markets exposure is preferable to direct investment in a specific country where companies might be looking overvalued.”