Bangkok--11 Jul--HSBC
***At least half of fund managers favour North America and Greater China equities***
***Only one in ten fund managers holds overweight views on bonds***
Global fund managers are looking to move to equities from bonds in the third quarter of 2012, according to HSBC’s latest Fund Managers’ Survey.
More fund managers are bullish on equities with 40% of them holding overweight views in 3Q 2012 from 25% in the second quarter. Only 10% of fund managers (vs 25% in 2Q 2012) held underweight views on equities this quarter.
As safe haven flows have pushed some bonds to overvalued levels, fund managers turned cautious on bonds with 30% holding underweight views in 3Q 2012, compared to 0% in 2Q 2012. A tenth of fund managers held a positive outlook towards bonds (10%).
More fund managers are neutral (56%) on cash in 3Q 2012, reflecting a relatively optimistic market outlook.
Vineet Vohra, HSBC’s Regional Head of Wealth Development, Asia Pacific, said: “The survey shows an improvement in investment sentiment across global fund managers. With fears of a disintegration of Europe’s currency union somewhat abated, fund managers are starting to see opportunities in equities based on valuation."
Seven in ten fund managers held overweight views on North American equities given its relatively resilient economy, while half held overweight views towards European equities (ex UK).
Fund managers turned more positive on Asia with 40% and 50% of fund managers holding overweight views on Asia Pacific ex. Japan and Greater China equities, respectively. No fund manager held underweight views on these particular equity funds.
Eric Fu, HSBC’s Head of Wealth Development, Hong Kong, Retail Banking and Wealth Management, added: “The survey points to regions that offer strong growth opportunities. Investors continue to favour Asia Pacific equities particularly in Greater China as further monetary easing policies and fiscal stimulus in China are expected while the majority of fund managers are positive on North American equities, on the back of market performance and signs of economic recovery.”
In terms of bonds, with investors continuing to look for yield in a low-interest environment, high yield bonds remained the most favourable within this asset class with 80% of fund managers holding overweight views.
As in the previous quarter, all fund managers are bearish on European bonds in 3Q amidst the unsettled Eurozone debt crisis.
Asset class allocation strategy
Underweight Neutral Overweight
3Q 2012 2Q 2012 3Q 2012 2Q 2012 3Q 2012 2Q 2012
Equities 10% 25% 50% 50% 40% 25%
?North America 30% 22% 0% 11% 70% 67%
?Europe (ex. UK) 20% 44% 30% 33% 50% 22%
?Asia Pacific ex. Japan 0% 25% 60% 50% 40% 25%
?Emerging markets 20% 11% 50% 78% 30% 11%
?Greater China 0% 14% 50% 43% 50% 43%
Bonds 30% 0% 60% 75% 10% 25%
?European 100% 100% 0% 0% 0% 0%
?High yield 10% 0% 10% 22% 80% 78%
Cash 33% 38% 56% 50% 11% 13%
Note: Figures may not add up to exactly 100 per cent due to rounding.
1Q 2012 global fund flows
Funds under management (FUM) across 14 of the world’s leading fund management houses1 polled reached US$4.36 trillion2 at the end of 1Q 2012, up by 6.3% from the previous quarter.
The survey recorded a net outflow of USD13.6 billion for equity funds in 1Q 2012, the seventh consecutive quarter, as investors remained concerned about the sustainability of the recovery and the unresolved European debt crisis. As risk averse sentiments drove demand for fixed income assets, bond funds recorded a net inflow of USD68.7 billion last quarter, particularly global bonds and high yield/emerging market bonds.
Net fund flows3 (as a percentage of FUM):
Asset class End 1Q 2012 End 4Q 2011
Emerging markets/High yield bonds +8.8% +2.8%
Global bonds +8.7% +2.6%
Greater China equities +1.0% -5.5%
North American equities +0.9% -2.8%
Emerging markets equities +0.2% -1.8%
Europe including UK equities -0.7% -2.4%
US bonds -1.1% +4.6%
Japanequities -1.5% +3.1%
Asian bonds -2.1% +0.5%
Europe including UK bonds -3.3% +2.7%
Global equities -4.3% -6.1%
Asia-Pacific ex-Japan equities -4.3% -2.0%