Surveys

Equity Investment Professionals Enter 2013 With Confidence - Aviva Investors Survey

Natasha Taghavi, Reporter, London, 6 March 2013

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Equity fund managers have entered 2013 far more confident about markets than their fixed income counterparts, according to the annual Aviva Investors fund manager survey.

The survey revealed that 69 per cent of equity managers are more confident about markets than they were this time last year. Equity returns beat 2012 expectations, and the overriding view is that the main central banks have done enough to calm markets. However, even though fixed income managers generally agree with this view, only a minority of them share the confidence of their equity peers (26 per cent), the firm said.

Conducted in early February, the survey asked fund managers with around £2.5 trillion (around $3.8 trillion) of assets under management for their views on market influences in 2013. The respondents were based in the UK, US and Europe.

“The eurozone remains a major concern for investors, with 90 per cent of fixed income and 71 per cent of equity managers expecting continued uncertainty to affect markets negatively this year. Another risk factor that has surfaced is the US fiscal cliff, with opinions divided on whether the outstanding areas of spending cuts and an increase to the debt ceiling will be agreed in Q1 this year. Just under half of fixed income (45 per cent) and equity managers (37 per cent) don’t believe it will,” the firm said in a statement.

Equity managers

Amongst the surveyed equity managers, there was a unanimous agreement that IPO activity will pick up this year compared to 2012. Last year, only 17 per cent were of this view. Over a third of the respondents (38 per cent) are expecting financial stocks to deliver the greatest performance this year. In contrast, 44 per cent of survey respondents were underweight in the sector last year. With only one manager overweight, this indicates that just over half of equity managers held index weights.

“From being completely unloved last year, the financials sector is now expected to contribute the most to returns in 2013. This is a dramatic change but one we have witnessed in our own portfolios, with our external managers adding to bank positions in the latter half of last year and into this year. Political risk and its impact on the macroeconomic picture remains by far the biggest concern, whilst respondents appear to think that there is scope for valuations to rise further,” said Peter Fitzgerald, co-head of multi-manager at Aviva Investors.

In addition to this, equity managers are more confident about global market returns than they were last year, with 71 per cent expecting 5 to 15 per cent for 2013. Last year, the majority expected 10 per cent or less for 2012.

Fixed income managers

Amongst fixed income managers, there was less of a concern about liquidity risk in corporate bonds, which was cited as the biggest risk factor last year (20 per cent vs. 77 per cent), and they are also less concerned about defaults in sovereign bonds (6 per cent vs. 64 per cent). The majority, however, stipulated low yields and rising interest rates as the biggest risks to their asset class.

Unlike their equity peers, fixed income managers are far less confident about market returns this year. While the majority (95 per cent) expect positive returns of up to 10 per cent for corporate bonds, they expect negative returns for sovereign bonds (62 per cent vs. 23 per cent last year).

Managers almost unanimously agree that diversifying fixed income investments will be a key driver for returns in 2013 (81 per cent).

 

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