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Global asset allocators rotate into UK equities

Global asset allocators have taken their most positive stance on UK equities for over three years, according to the latest Bank of America MerrillLynch Fund Manager Survey.

In August a net 2 per cent of asset allocators were underweight in UK equities, versus a net 15 per cent underweight in July, the lowest underweight stance since May 2007.

The move into UK was at the expense of America and Japan, while there was also a large move into eurozone equities. In August a net 14 per cent of allocators were underweight in America, down from last month’s 7 per cent overweight, and the lowest level since January 2008.

“The US now seems to be the focal point of global growth worries,” says Patrick Schöwitz, a European equity strategist at BofA Merrill Lynch Global Research.

Meanwhile Japan replaced UK as the least popular region, with a net 27 per cent of allocators underweight in August, up from 11 per cent last month.”

Schöwitz says the reason behind the rise in popularity of UK equities is hard to explain. “Either economic policies in the UK have cheered people up or it could just be a lack of alternatives,” he says.

For the first time since November last year, asset allocators went overweight in eurozone equities in August, compared with a net 10 per cent underweight position in July and a 34 per cent underweight stance three months ago. In August, allocators had a net 11 per cent overweight position in the region.

In terms of the rest of the survey, Schöwitz describes it as “a cautious and careful consensus”.

“It is not a survey that comes up with many macro conclusions,” he says. “The bearishness shown in the last two surveys has abated and risk appetite has stabilised. It seems many investors are waiting to see more data before doing anything.”

In August a net 5 per cent of global fund managers predicted the global economy will improves over the course of the next 12 months, compared with the 12 per cent of managers who last month predict the economy would deteriorate over the next year.

Meanwhile, cash balances fell from 4.4 per cent in July to 3.8 per cent in August, a sign that risk appetite is increasing. The underweight position in bonds increased further to a net 23 per cent underweight from a 15 per cent underweight last month.

Some 187 fund managers with a total of £327 billion of assets participated in the survey. It was conducted with TNS, a market research company, from August 6-12.


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