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(18 April 2011) - Wren
Investment Advisers has been conducting its quarterly
survey of global equities funds since 1990. The
results have often provided useful insights into
money flows, asset allocation trends and fund
manager sentiment.
But over the past twelve months, changes to the
funds themselves have probably been more instructive
than their asset allocations. Nearly one-fifth
of our sample have either been wound up or merged
as investors explore exchange-traded funds (ETFs)
and specialist country and regional funds.
In the three months to 31 March 2011, the trends
we observed in late 2010 persisted and in several
cases intensified.
Despite its ballooning government debt and faltering
economic recovery, the U.S. remains quite popular
with fund managers. Most have maintained an above-average
allocation and have lifted their stock holdings
during the first three months of 2011. Managers
are cautious on Japan, the UK and Continental
Europe with most allocations well down on a few
years ago but still higher than the neutral benchmark.
Japan is a case in point. The average weighting
in our sample is 7.53% - an eight-year low - but
this is still above the neutral benchmark of 7.40%.
It will be interesting to see if this marginal overweight
allocation persists in the June quarter as managers
assess the impact of the Sendai tsunami and Fukushima
nuclear disaster.
It is a similar story in the U.K. where the average
fund weighting has dropped to a fourteen-year low
of 9.09%. Stock allocations in the rest of Europe
are up slightly on the December quarter 2010 and
are now about 2.4% above the neutral benchmark.
Our first chart suggests that most global fund managers
are well underweight in Asian equities but this
is a little difficult to interpret. The benchmark
weighting for Asia has now climbed to 14.3% thanks
to the sharp rise in Australia's share of the world
market and the growing market capitalisation of
the Shanghai, Hong Kong and Bombay (Mumbai) stock
exchanges.
Although stock allocations to Asia and other developing
markets are rising, global fund managers seem reluctant
to match the benchmark just yet.
Emerging markets in South America, Eastern Europe
and North Africa are included in the 'Other' category
and this has been rising steadily since early in
2009.
Warning: While all care has been
taken in the preparation of this document (using
sources believed to be reliable and accurate), we
do not accept responsibility for any loss suffered
by any person arising from reliance on this information.
This document is not financial product advice and
does not take into account any individual's objectives,
financial situation or needs.
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