By Vicki Schmelzer
NEW YORK (MaceNews) – Global investors pared equity positions and increased cash holdings in May, driven by a rethink of growth and inflation expectations, according to the findings of BofA Global Research’s monthly fund manager survey, released Tuesday.
A net 84% of those polled in May looked for stronger world economic growth this year, down from a net 90% in April and compared to 91% in March and February, which saw “the best economic outlook ever,” the survey said.
In May, a net 83% of managers looked for higher global CPI in the coming 12 months, down from the record net 93% seen in April and March.
Average cash balances held at 4.1% in May, unchanged from April and up only modestly from 4.0% in March, according to BofA Global.
However, allocation to cash rose to a net 9% overweight, up from a net 1% underweight in April and compared to a net 1% overweight in March.
On overall asset allocation, a net 54% of portfolio managers were overweight global equities in May, down from a net 62% overweight in April and a net 61% in March. These levels compare to the record highs near 70% seen in 2011.
This month, a net 68% of portfolio managers were underweight bonds, unchanged from April and compared to a net 66% underweight in March.
Fund managers continued to eye the 1.5%-2.0% range for 10-year U.S. Treasury yields, with many thinking that a rise above 2.0% would be the trigger for a larger sell-off in the S&P500.
Global investor allocation to commodities rose to a net 27% overweight in May, compared to a net 23% overweight in April and close to the record net 28% overweight seen in March.
On regional equity asset allocation, global investors readjusted positions to favor eurozone and UK stocks.
Allocation to U.S. stocks stood at a net 6% overweight in May, down from a net 7% overweight in April and a net 9% overweight in March and February.
This month, a net 35% of managers were overweight eurozone stocks, up from a net 30% in April and March.
Fund managers had a net 30% overweight to global emerging markets (GEM) in May, down from a net 33% overweight in April and a net 45% overweight in March and half the record net 62% overweight seen in January
This month, portfolio managers had a net 2% overweight in Japanese equity markets this month, down from a net 8% overweight in April and a net 10% overweight in March.
UK equity allocations showed managers with a net 2% overweight in May, compared to a net 2% underweight in April and a net 1% underweight in March. Current allocation levels are the highest since March 2014, the survey said.
In May, the biggest “tail risks” feared by portfolio managers were: “Inflation” (35% of those polled), “a ’taper tantrum’” in the bond market (27%), “Asset bubbles” (15%), “COVID-19” (9%) and “Higher taxes” (7%).
Last month, the biggest “tail risks” were: “Bond market ‘taper tantrum’ (32% of those polled), “Inflation” (27%), “Higher taxes” (15%), “COVID-19 vaccine rollout” (15%) and “Peak economic growth (6%).
In May, the top “most crowded” trades deemed by managers were: “Long Bitcoin” (43% of those polled), “Long Tech” (21%), Long ESG” (20%), “Short U.S. Treasuries (8%) and “Long Infrastructure” (4%).
Last month, the top “most crowded” trades were: “Long Tech” (31% of those polled), “Long Bitcoin” (27%), “Long ESG” (17%), “Long global cyclicals” (14%) and “Short U.S. Treasuries” (9%). Note that ESG stands for Environmental, Social and Governance and refers to a class of investment also known as “sustainable investing.”
An overall total of 216 panelists, with $625 billion in assets under management, participated in the BofA Global Research fund manager survey, taken May 7 to 13, 2021. “194 participants with $592bn AUM responded to the Global FMS questions and 78 participants with $133bn AUM responded to the Regional FMS questions,” BofA Global said.
Contact this reporter: vicki@macenews.com
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