Risk appetite returns in 2012, says BofA ML
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Cash levels among institutional investors have fallen to their lowest levels since July 2011, according to the Bank of America Merrill Lynch (BofA ML) Survey of Fund Managers.
The survey reveals that cash holdings have fallen to 4.4% of portfolio’s holdings on average, down from 4.9% in December.
The proportion of investors “taking lower than normal” levels of risk has also fallen to 33% of respondents, down from 42% in December.
The research reveals that only 3% of 214 institutional investors believe the world economy will weaken in the coming 12 months, falling from 27% in December.
Michael Hartnett, chief global equity strategist at BofA ML Global Research, says: “Investors are tip-toeing rather than hurtling toward higher risk exposure; the US market and high quality cyclical sectors, such as energy and tech, have been the main beneficiaries of lower cash holdings.”
Geopolitical risk was highlighted by respondents with more than two-thirds belieiving it was at “above normal” levels.
The survey also reveals that fears of a global corporate profit slowdown have receded in the past month, shrinking from 41% of respondents in December to 21% in January.
It also found greater support from investors for corporates to invest greater sums, with more than half of respondents claiming that companies were “under-investing”.
According to the survey, although there is still a “gulf” between the US and Europe as an investment location, negative views have eased.
It found 56% of respondents thought the outlook for corporate profits was more favourable to the US, increasing from 50% in December. The survey also showed 70% of respondents thought the profit outlook for Europe was least favourable, marking a fall from 72% in December.
Gary Baker, head of European equities strategy at BofA ML Global Research, says: “Despite improvement in global and European growth expectations asset allocators remain deeply skeptical towards European equities, especially banks.”
Investors have upped exposure to US equities on average to 28%, compared with 23% in December. While 31% remain underweight eurozone equities, down from 35% in the preceding month.
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