Global fund managers bet on Japan and UK

23 January 2009

The latest Wren Research survey of global equity funds shows that Japan and the U.K. were once again the favourite stock markets for international investors. The consensus view seems to be that the U.S. and Asia are more vulnerable to weaker earnings than elsewhere and that Continental Europe is more risky than the U.K.

The world benchmark weighting for the U.S. stock market is 44.4% but the participants in our survey had an average weighting of 42.7%. That's significantly below average but not as low as it was during the late 1990s. American fund managers are generally more pessimistic about their own market than European and Asian investors with the average asset allocation of just 41.9%.

Japan has a neutral weighting of 10.0% in the world market but most managers had well above this benchmark, especially European-based funds which had an average weighting of 14%. Some have as much as one-third of their money in Japan.

Demand for Asian stocks has continued to trend downward with nearly every fund holding well under the 10.1% neutral weighting for this region. American managers are particularly gloomy on Asia's prospects with an average asset allocation of just 4.7%.