The survey of 50 fund managers and chief investment officers in the
United States, Europe, Britain, Japan and China was conducted
between Nov. 17 and 26.
During this period, U.S. Federal Reserve officials strongly hinted
that markets should expect an interest rate increase in December,
its first since 2006. Mario Draghi, president of the European
Central Bank, meanwhile indicated the ECB was ready to expand
monetary easing at its Dec. 3 policy meeting.
Investors remained relatively bullish on the outlook for risk
assets, keeping overall equity holdings steady in November at 48.2
percent in global portfolios. Bond holdings rose one percentage
point to 37.4 percent while cash was cut to 5.4 percent from 6.3
percent in October.
Matteo Germano, global head of multi-asset investing at Pioneer,
highlighted risks around China, emerging markets and the Fed as it
exits almost a decade of near-zero interest rates. But he remains
positive nevertheless.
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"We believe that amid all the structural risks which are still
present ... the drivers of a cyclical uptrend continue to be in
place," Germano said.
This sentiment was most apparent within asset managers' equity
portfolios, where they raised their U.S. holdings to 40.2 percent,
up from 38.5 percent in October.
The S&P 500 <.SPX> rallied hard in October, ending the month 8.3
percent higher. It was unable to repeat the stellar performance in
November, adding only half a percent, but investors remain upbeat
about the outlook for the U.S. economy.
"Momentum is positive in the U.S.," said Germano. "Growth is more
widespread and robust, and improvements in the labor market will
likely continue to support internal demand."
Peter Lowman, chief investment officer at Investment Quorum, a
UK-based wealth manager, predicted that any upside surprises in
global growth would be positive for equities and identified the
United States and the euro zone as potential beneficiaries.
Investors also raised their UK equity holdings to 11.2 percent --
the highest since May 2015 -- and kept their euro zone equity
allocation steady at 18.6 percent.
BOTTOMED OUT EMERGING MARKETS
One of the most notable moves this month was a thaw in sentiment
towards emerging markets. Investors raised emerging Europe equity
holdings to 2.5 percent, the highest since May 2011, whilst Asia
ex-Japan equities increased to 6.5 percent.
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Emerging stocks <.MSCIEF> have lost 14 percent this year and have
not made a positive return for investors since 2012. Some managers
take the view the market has now bottomed out and are seeking
opportunities where assets look over-sold.
"Clearly, emerging markets have suffered the most over recent months
which has now led to pockets of value appearing, especially in those
countries less affected by the collapse in commodity prices," said
Lowman.
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"Therefore, selective countries within EM could be an area of
investor interest as we enter 2016."
Emerging Europe is thought likely to receive a boost from any extra
ECB stimulus, as those economies are closely linked to recovery in
Western Europe.
Meanwhile, Asia's manufacturing hubs too should benefit from
persistent low oil prices and any pick up in U.S. consumer spending.
U.S. durable goods orders rose 3 percent in October from a month
earlier.
Investors continued to steer clear of Latin American equities,
however, cutting their exposure there to 1.1 percent, the lowest
ever recorded by the Reuters poll.
Brazil remains a big drag on performance for Latin American
equities, amid concerns that efforts to fight corruption in the
region's largest economy could derail efforts to address problems
with the country's finances.
Within fixed income portfolios, asset managers trimmed U.S. bond
holdings slightly to 38.3 percent while UK bond holdings fell to 9.8
percent, the lowest since May 2015.
But investors ramped up Asian ex-Japan bond holdings from 2.6
percent in October to 4.5 percent, the highest allocation since the
Reuters poll began.
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Some managers remained cautious about jumping back into these
waters, however, despite attractive valuations.
Chris Paine, multi-asset fund manager at Henderson Global Investors,
said local currency emerging market debt was starting to look cheap
on a relative basis.
"But a significant portion of this is accounted for by currency
volatility," he said. "We believe the yields on offer for hard and
local currency EM debt don't offset the credit risk that the
underlying indices entail."
(Additional reporting by Maria Pia Quaglia Regondi; Editing by
Catherine Evans)
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