LONDON: European asset managers cut their exposure to stocks in August as expectations of rate hikes in the United States pushed many to book profits while shares remained near record highs, a monthly poll shows.
A Reuters survey of 11 European chief investment officers and fund managers found the average recommended allocation to equities in balanced portfolios dropped to 45.7 percent from 49 percent a month earlier - the lowest since September 2013.
The pullback in equities benefited alternative investments, such as hedge funds, private equity and commodities. They rose to 7.2 percent from 5.6 percent. Property allocations rose to 1.7 percent from 0.5 percent.
"We decided last week, with equities actually not too far off their highs for the year, was a better time to lower our still constructive stance on equities," said Steven Steyaert, a portfolio specialist at ING Investment Management.
Steyaert said a combination of geopolitical threats, such as the conflict in Ukraine, and mounting speculation the U.S. Federal Reserve will soon tighten monetary policy had prompted ING's new stance on stocks.
The MSCI World Index <.MIWO00000PUS>, which tracks stocks from developed economies, is currently at 1,748, less than 1 percent off the record high of 1,765.77 points reached in July.
But even if U.S. interest rates rise soon, they are likely to remain low enough for investors to keep up their search for yield, Steyaert said, to the benefit of asset classes such as real estate.
Elke Speidel-Walz, the chief investment strategist at Deutsche Bank's asset and wealth management arm, also highlighted the tension over Ukraine as leading both to greater risk aversion and to as well as a misfiring economic recovery in Europe.
"As recent macro indicators in the Eurozone have surprised on the weak side, this could lead to a new evaluation of the outlook for ongoing recovery in the Eurozone and hence impacting financial markets," Speidel-Walz said.
Within global equity portfolios, the poll showed European investors allocating more to emerging markets and the U.S. at the expense of Europe and the UK. One respondent cited uncertainty over a referendum on Scottish independence next month as making British assets less attractive.
The average allocation in global equity portfolios to North America, where growth prospects look brighter than they do in Europe, rose more than a percentage point in August to 40.7 percent, the poll showed, the highest since July last year.
Meanwhile, allocations to the euro zone fell more than two percentage points to 30.2 percent. Those to the UK dropped to 6.3 percent from 7.5 percent a month earlier. Allocations to Asia excluding Japan rose to 6.3 percent from 5.8 percent in July.- Reuters
Limited time offer:
Just RM5 per month.
