U.S. fund managers cut global equity holdings but back local stocks: Reuters poll

[September 30, 2014]  By Ashrith Doddi

(Reuters) - U.S. fund managers recommended cutting global stock holdings in their model portfolio to the lowest since the financial crisis and suggested increasing higher cash and property allocations, a Reuters poll showed.

Stock markets in the U.S. and a few Asian countries have rallied to record highs in recent weeks, even though the Federal Reserve is widely expected to end its stimulus program next month and raise rates by June.

But a poll of 12 funds taken over the past week showed money managers preferred to lower their exposure to equities to 55.9 percent this month from 56.1 percent. Cash allocations soared to a six-year high of 5 percent of their total portfolio.

Investors probably cut their equity allocations after the benchmark Standard & Poor's 500 index crossed the 2,000 mark for the first time in late August, according to Keith Hembre, chief investment strategist at Nuveen Investments.

However, stocks are unlikely to lose much of their appeal. Data last week confirmed the U.S. economy is recovering steadily and a government report on Friday is expected to show more than 200,000 jobs were created in September.

A recent Reuters poll indicated global equity markets are shifting away from central bank cash and are relying on economic optimism to fuel the next surge. American and British shares are expected to lead the rally.

"It's hard to get too bearish if earnings are still going right," Hembre said. His firm expects to raise its equity holding over the last quarter of this year.

Within equities, fund managers suggested buying more U.S. stocks and reducing a cut in euro zone holdings to its lowest since September last year.

The European Central Bank on Thursday is expected to disclose more details on its asset-backed securities and covered bonds purchase plan. But so far the move has failed to impress economists, who have stuck to forecasts of below-target inflation and weak growth.

Many predict the central bank will eventually resort to a full-blown stimulus program that involves buying vast tranches of sovereign debt, like its peers in the Britain, Japan and the U.S.

That has led U.S. funds to consistently increase their euro zone bond allocations since June. It rose to 12.2 percent in September from 10.9 percent in August.

Minor changes were seen within the global fixed-income portfolio as recommendations for investment-grade bonds went up slightly.

(Additional reporting By David Randall; Polling by Hari Kishan and Kailash Bathija; Editing by Larry King)

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