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Topic: Learning Section
Cautious funds grab corporate debt for yield: ( HEMANT
| From : Hemant Parikh at 01:33 AM - Jul 30, 2010 (19 months ago) |
Surveys of 51 leading investment houses in the United States, Britain, Europe ex-UK, and Japan showed investors cutting back on equities and raising cash and bond holdings.
Equities were at 50.6 per cent of a typical mixed-asset portfolio, bonds at 36.0 per cent and cash at 5.8 per cent. June figure's were 51.8 per cent, 35.1 per cent and 5.2 per cent, respectively.
Changes in the sample may have exaggerated the move away from equities, but there was little indication in the polls that investors were shaking off this year's standoffishness to risk.
This is despite some degree of moving on from the euro zone debt crisis and signs that Europe's economy may be more robust than earlier thought. The US economy appears to be slowing, raising concerns about global recovery.
"Concerns about the euro government debt crisis seem to be receding. However, most warning signs are still flashing red," said Mauro Ratto, head of investment management in Europe and Asia at Pioneer Investments in Dublin.
Investors have not, however, battened down the hatches for a sharp downturn.
One example of this can be seen in the demand for corporate debt, which would imply a degree of positive conviction about the state of global corporate finances.
Exposure to investment grade bonds rose to 22.6 per cent within bond allocations in July from 19.7 per cent in June. High yield debt was less popular, however.
David Joy, chief market strategist of Columbia Management Investments, suggested investors were being driven by a belief that the economy was not heading too far down -- into another recession, for example -- and that traditional safe haven investments were overpriced.
"We don't expect a double dip. Because of that, we don't see a lot of value (in Treasuries) at these levels," he said.
REGIONALLY
US fund managers lifted their exposure to equities and corporate bonds slightly in July.
The poll of 12 US-based fund management firms found they held an average of 65.0 per cent of their assets in equities, compared with 64.8 per cent a month earlier.
Bond exposure rose to 29.8 per cent from 29.5 per cent. Cash dropped to 2.0 per cent from 2.2 per cent.
Japanese fund managers cut their weightings for equities to the lowest in more than 11 years and moved into cash.
The Reuters poll of 13 fund managers showed an average weighting for equities at 44.2 per cent, down from 45.1 per cent the previous month. The bond weighting fell to 48.2 per cent in July from 49.2 per cent the previous month and cash positions jumped to 4.7 per cent.
European investors boosted fixed income allocation to a 2010 high.
The poll of 15 Europe ex UK asset management firms showed a typical mixed portfolio holding 40.6 per cent in bonds this month, which include government and corporate debt, compared with 37.4 per cent in June.
The allocation to equities stood at 46.8 per cent, compared with 47.9 per cent in June, when the survey polled 13 asset managers. This change in sample exaggerated the move, which otherwise would put equities slightly higher.
British fund managers continued to seek out the security of cash and bonds while equities remained relatively out of favor.
The survey of 11 fund managers showed exposure to cash, bonds and property increased since the previous month.
Equity holdings were 46.4 per cent compared with 49.2 per cent, bonds rose to 25.5 per cent from 24.5 per cent and cash also rose, to 9.6 per cent from 8.7 per cent.
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