Fund Managers' Current Asset Allocation
Urban Carmel | Dec 18, 2014 12:53AM ET
Every month, we review the latest BAML survey of global fund managers. Among the various ways of measuring investor sentiment, this is one of the better ones as the results reflect how managers are allocated in various asset classes. These managers oversee a combined $700b in assets.
The data should be viewed mostly from a contrarian perspective; that is, when equities fall in price, allocations to cash go higher and allocations to equities go lower as investors become bearish, setting up a buy signal. When prices rise, the opposite occurs, setting up a sell signal.h2 Here's a brief recap of the past several months:/h2
July: fund manager equity allocations reached a bullish extreme. At +61% overweight, it was the second highest since the survey began in 2001, a clear risk to near-term equity performance (post ).
October: equities worldwide fell more than 7-10%; most markets were, at least briefly, negative for 2014. Bond yields made new lows. Fund managers raised their cash levels back to 4.9%. Equity allocations dropped to their lowest levels in 2 years (here .
- US (+16%): The November weighting was a 15 month high (+25%), but that fell to +16% in December. They had been +30% overweight in August 2013 (the third highest US weighting ever).
- Europe (+26%): Exposure to Europe jumped from +8% to +26% overweight in the last month. Before August 2014, Europe had been investors' most most preferred region for 11 months in a row.
- Japan (+40%): Managers are +40% overweight Japan, down from +46% in November which was highest since April 2006. Funds were -20% underweight in December 2012 when the Japanese rally began.
- EEM (+1%): Managers increased their EEM exposure to +1% overweight from-5% underweight in October.
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