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Gems lose sparkle as weighting slashed

Global fund managers have slashed their weighting in glo-bal emerging markets to the lowest level since March 2009, acc-ording to the latest Bank of America Merrill Lynch fund manager survey.

The survey questioned 188 managers running £353bn of assets. Having been 43 per cent overweight in Gems in January, managers cut their position to a net 5 per cent overweight in February.

Bank of America Merrill Lynch says this represents the steepest monthly decline in Gems in the survey’s history.

In an environment of rising inflation, managers are preferring developed markets, with 34 per cent going overweight in American equities, up from 27 per cent.

Appetite for European equities has also risen. In January, 9 per cent of global managers were underweight in the region but this has since risen to 11 per cent overweight.

BoA Merrill Lynch European equity strategist Patrik Schöwitz says the switch out of Gems lar-gely reflects a scaleback in positions in Latin America and Asia. For the first time in the survey’s history, managers went underweight in Brazil to 19 per cent from 30 per cent overweight.

Instead, investors prefer the Emea region, with Russia seeing its weighting rise from 50 per cent overweight to 88 per cent.

Hexam Emerging Europe fund manager Stuart Richards says: “While global demand for commodities is an obvious driver of interest in the region, the Russian government has already taken steps to accelerate structural reform to give additional momentum to domestic economic growth rates.”


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