Fifty seven per cent of global fund managers, versus 75 per cent in 1Q13, covered in HSBC’s latest Fund Managers’ survey continue to favour equities in the second quarter of 2013 with no one holding underweight views towards this asset class.
A tenth of respondents (14 per cent) turned overweight towards bonds and cash in 2Q13 from none in the previous quarter (zero per cent for both in 1Q13). Over two in five fund managers (43 per cent) hold an underweight view towards bonds and cash compared to 38 per cent and 63 per cent respectively in 1Q13.
Vineet Vohra, HSBC’s regional head of wealth development, Asia Pacific, says: “Global fund managers generally remain optimistic about the prospects of equities. Emerging markets equities including Asia equities continue to be attractive as a result of better fundamentals. However, it is worth noting that some managers have turned cautious due to renewed concerns on the Eurozone debt crisis.”
Emerging markets equities are back in the spotlight in 2Q13 as over half of fund managers (57 per cent) hold positive views, compared to only 29 per cent in the previous quarter. Preference for North America equities dropped from 75 per cent to 57 per cent while Asia Pacific ex Japan equities are favoured by 50 per cent of fund managers, up from 43 per cent. No fund manager is underweight on Greater China, emerging markets and Asia equities, while 14 per cent are underweight on North America equities (vs 25 per cent in 1Q13).
In terms of bonds, Asian local currency bonds (75 per cent) stand out given the region’s stronger fundamentals and potential currency appreciation. With the USD under pressure from the Fed’s continued support for quantitative easing, four in five fund managers are underweight US dollar bonds and none of them holds an overweight view towards this asset class.
Funds under management (FUM) across 10 of the world’s leading fund management houses polled reached almost USD4trn at the end of 4Q 2012, up by 3.2 per cent or USD124bn, from the previous quarter.
Bond funds were the major contributors to the FUM growth, representing 40 per cent or around USD50bn of the total increase. Bond funds also recorded the second largest net inflow since 2008 totalling USD55.9bn, of which Asian bonds grew 11 per cent. Equity funds continued to record a net outflow of USD13.4bn in 4Q 2012, the tenth consecutive quarter, as investors were concerned about uncertainties from the European debt crisis and the US fiscal talks.
All equity and bond markets except North America equities and global bonds recorded positive returns in 4Q2012. Greater China equities were the best performer with a 12.9 per cent growth, followed by Europe including UK equities (+7.0 per cent), and Asia Pacific ex Japan equities (+6.0 per cent). On fixed income, Europe including UK bonds recorded 4.6 per cent return and high yield/emerging markets bonds went up 3.9 per cent.
Vohra says: “Greater China equity funds suffered a net outflow of over 17 per cent as investors likely took profit from the strong market rally in 4Q12. Except for this, emerging markets equities are generally in good shape and continue to attract inflows with Asia-Pacific ex Japan equity funds having net inflows for the first time since 3Q2011 driven by its relatively resilient economies. The strong flows to bond funds reflect that investors are still seeking yield amidst the low interest rate environment. As no asset class will outperform all the time, investors are advised to avoid over exposure to any particular asset class and adopt the principles of asset allocation and diversification in their financial planning.”