(August 10, 2012) — Global fund managers are increasingly souring on the investing prospects of the Eurozone, a new survey has found.
Well over half of international fund managers were underweight their Eurozone government bonds and equity benchmarks at the end of June, according to research by consultancy bfinance. The fund managers, comprising 40 international firms with $8.6 trillion in assets under management in total, expect to remain underweight those benchmarks through the end of the year.
“In a financial environment still perceived as highly dependent on Eurozone crisis developments, international asset managers are considering, yet again, reducing their investment in sovereign debt over the second half of the year,” wrote the consultant group. Instead, fund managers are looking outside of Eurozone sovereign debt for investment opportunities. While the fund managers showed the most aversion to developed sovereign debt, interest is growing in emerging and corporate debt and non-European equities.
At the end of June, 54% of fund managers were underweight their Eurozone sovereign debt benchmarks, and 56% expected by the end of the year to be underweight those benchmarks. Likewise, a resounding 61% of managers said they were underweight their Eurozone equity benchmark at the end of June, though those surveyed expected that figure to decrease to 45% by the end of the year. The spillover from the Eurozone seemed to have brought down the fund managers’ estimation of developed sovereign debt in general. A full 60% of respondents expected developed sovereign debt to offer the worst risk/return of several different fixed-income categories, with only 4% predicting it would offer the best.
But as the Eurozone exodus marches on, other asset classes, and other regions, are looking more attractive. For emerging sovereign debt, 54% were overweight after June, and 60% expect to be so by the end of the year. Corporate debt across the board, outside of financials, is piquing the interest of fund managers. Fund managers also expect to plunge into emerging market equities. While only 34% were overweight emerging equities at the end of June, 75% predicted they will be by the end of the year. Asian equities (not including Japan) and US equities were also appealing to fund managers, with 51% and 66%, respectively, saying they were overweight their benchmarks at the end of June.
To read the survey in full, click here.