By Vicki Schmelzer
NEW YORK (MaceNews) – Improved growth prospects and fading recession fears prompted global investors to trim their cash allocation and add to equity holdings in August, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
A net 45% of those polled this month looked for weaker economic growth in the coming year, down from the net 60% looking for weaker growth in July and a net 62% with that view in June. This compares to July of 2022, when at the peak of global growth concerns, a net 79%, a record high, were looking for weaker growth.
Recession fears have continued to abate, with a net 42% of global investors now saying the world economy is unlikely to experience recession in the coming year, the most since June 2022.
Among respondents, “31% see no recession in the next 18 months, up from 19% in July and 14% in June,” BofA Global Research said.
In August, a net 81% of fund managers looked for lower global CPI in the coming 12 months, vs. a net 78% in July and a net 87% in June. These levels compare to the record high of 90% in December 2022.
In terms of asset allocation, global investors added to equity and bond holdings and trimmed cash longs.
In August, a net 11% of portfolio managers were underweight global equities compared to a net 24% underweight in July and a net 32% underweight in June. In September 2022, fund managers held a record 52% underweight in stocks.
A net 5% of managers were overweight bonds in August, compared to a net 3% overweight in July and a net 11% overweight in June. May, with a net 14% overweight, which was the highest bond allocation since March 2009.
“Investors have been OW bonds for 8 out of 9 months in 2023, after a 14-year UW streak which ended in 2022,” BofA Global Research said.
Allocation to cash fell to a net 20% overweight this month, compared to a net 32% overweight in July and a net 31% overweight in June.
Average cash balances stood at 4.8% in August, the lowest since November 2021 and compared to 5.3% in July and 5.1% in June.
This month, commodity allocation stood at a net 1% underweight, compared to a net 9% underweight in July and a net 3% underweight in June. .
On regional equity allocation, global investors added to Emerging Market, Japanese and UK holdings, while paring back stocks in other regions.
Allocation to U.S. stocks stood at a net 22% underweight in August, compared to a net 10% underweight in July and a net 25% underweight in June.
This month, a net 12% of managers were underweight eurozone stocks, compared to a net 1% underweight in July and a net 3% overweight in June
Allocation to GEM stood at a net 34% overweight in August, compared to a net 23% overweight in July and a net 13% overweight in June.
Allocation to Japanese equities stood at a net 6% overweight in August versus a net 3% underweight in July and UK allocation stood at a net 18% underweight this month compared to a net 21% underweight in July.
In August, the biggest “tail risks” feared by managers were: “High inflation keeps central banks hawkish” (45% of those polled), “Geopolitics worsen” (14%), “Bank credit crunch & global recession” (14%), “Systemic credit event” (12%) and “AI/tech bubble” (10%).
In July, the biggest “tail risks” were: “High inflation keeps central banks hawkish” (45% of those polled), “Bank credit crunch and global recession” (18%), “Geopolitics worsen” (15%), “AI/tech bubble” (11%) and “Systemic credit event” (10%).
In August, the “most crowded” trades deemed by global managers were: “Long Big Tech” (net 60% of those polled), “Short China equities” (14%), “Long Japan equities” (6%), “Short US dollar” (5%), “Long T-Bills” (4%), and “Long IG bonds” (3%).
In July, the “most crowded” trades deemed by global managers were: “Long Big Tech” (59% of those polled), “Long Japan equities” (14%), “Short China equities” (8%), “Long T-Bills” (5%), “Short U.S. dollar” (5%) and “Short U.S. banks” (2%)
An overall total of 247 panelists, with $635 billion in assets under management, participated in the BofA Global Research fund manager survey, taken August 4 to August 10, 2023. “211 participants with $545bn AUM responded to the Global FMS questions and 137 participants with $273bn AUM responded to the Regional FMS questions,” BofA Global said.
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