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Fund Managers Dump Equities, Grow Bond And Cash Allocations

Vanessa Doctor, Asia Correspondent, 7 December 2011

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Equities are losing popularity as investment products of choice among global fund managers, who now seem to be increasingly interested in bonds and cash, a new survey by HSBC reveals.

In the latest Fund Managers' Survey, HSBC found that while 30 per cent of the fund managers polled held a positive view of equities in the fourth quarter of 2011, this is significantly down from 63 per cent in the previous quarter. The continued market volatility has also affected their "underweight" opinion of equities, with 50 per cent holding this view against only 25 per cent in Q3 2011. 

On the other hand, from a zero figure in the third quarter, 22 per cent of fund managers are now bullish on bonds, while 56 per cent are taking a neutral view. An overweight view has also developed on cash, with 44 per cent, from 0 per cent, holding this view. HSBC says the attention to bonds comes as investors look for yield in a low interest environment, while those turning toward cash reflect weaker investor sentiment due to the still-unresolved European debt crisis.

Equities remain the preferred asset class, however, especially those based in North America and Greater China with 45 per cent and 44 per cent of the respondents maintaining a bullish outlook. Other popular investment options were global emerging markets/high yield bonds, at 78 per cent, Asian bonds, at 63 per cent, and US dollar bonds, at 30 per cent.

Overall, the uncertain global economy caused a decline in funds under management from both equity and bond funds in the third quarter, down 10 per cent from Q2 2011 to $3.96 trillion in the third quarter. Equity funds accounted for 76 per cent of the drop, or around $335 billion.

"With expectations of less stringent monetary policies in China, investors are staying positive on Greater China equities. On the back of still resilient corporate earnings and relatively undemanding valuations, the US equities markets could also offer potential gains. The continued strength of Asian economies and higher yields from emerging markets/high yield bonds compared to government bonds make these assets potentially appealing to investors," said Simon Williams, group head of wealth management, retail banking and wealth management at HSBC.

The results were collected from 13 fund management firms from October to November, including AllianceBernstein, Allianz Global Investors, Baring Asset Management, BlackRock, Fidelity Investment Management, Franklin Templeton Investments, HSBC Global Asset Management, Invesco Asset Management, Investec Asset Management, JP Morgan Asset Management, Prudential, Schroders Investment Management and Societe Generale.

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