Emerging market equities remained most-preferred by global investors for a fourth consecutive month, reveals the latest Fund Manager Survey (FMS) from BofA Securities. Allocation to emerging market increased by 3 percentage points month-on-month to net 36 per cent, highest since March 2019. On the other hand, allocation to US equities also increased by 16 percentage points to 19 per cent. However, the survey highlighted that global fund managers turned less bullish on equities as an asset class in February with average cash levels falling to 4 per cent during the month from 4.2 per cent in January, reveals the latest Fund Manager Survey (FMS) from BofA Securities. When average cash balance rises above 4.5 per cent then a contrarian buy signal is generated for equities.
On the other hand, when the cash balance falls below 3.50 per cent, a contrarian sell signal is generated, according to the global financial services firm. The February Global FMS, which was conducted from February 6-13, witnessed a total of 221 panellists with $676 billion worth of assets under management (AUM) in the survey. The outcome of the 2020 US election continues to be a top concern of fund managers for a second straight month with 26 per cent of those surveyed sees the event as the biggest tail risk, according to the survey.
It was followed by Bond bubble pops (22 per cent) and coronavirus (21 per cent). The survey showed that global corporate profit expectations dropped in February by 12 percentage point month-on-month to net 15 per cent.
However, FMS investors expect profits to improve over the next 12-months. “Rising COVID-19 fears, notably around Chinese growth, led to the first cut in FMS global growth, global profits and global inflation expectations since October 19,” BofA Securities said. Fund managers have increased their biggest positions in growth sectors since July 2008.
However, their allocation to banks dropped 8 percentage points in February to net 1 per cent.