Investors enter August in cautious mood, keeping exposure to equities relatively low and moving into more defensive areas such as bonds and US stocks, according to new data yesterday.
Concerns about global interest rates, particularly what the US Fed is planning as the economy shows signs of slowing, provided much of the backdrop.
The surveys of 45 leading investment firms in the US, Japan, continental Europe and Britain showed an average of 59.7 per cent of portfolios were in equities at the end of July, below 60 per cent for the second month in a row.
Holdings of bonds, meanwhile, rose to an average 33.3 per cent from 33 per cent at the end of June, the highest level since May 2005.
Cash holdings dropped to 4.4 per cent from 5.0 per cent. "It's a pretty challenging environment for markets," said Andrew Cole, a director at Baring Asset Management's
strategic policy unit, pointing at worries about slowing economic growth and central banks such as the Fed keeping on tightening.
Equities holdings were slightly higher than the 59.3 per cent a month earlier, probably as a result of sample changes, but investors were taking defensive action within their equity portfolios.
All four surveys showed a move into North American equities, a shift that reflects a growing view among professional investors that the US markets, which have underperformed for the last few years, currently offer more protection.
Although geopolitical tensions rose during the polling period and oil prices hit records, investors indicated that they were most concerned about interest rates rising so high that they hit economic growth.
"Credit tightening in the US over the last two years is now finally dampening the US and global economic growth," said Kiyoshi Ishigane, a strategist at Mitsubishi UFJ Asset Management.
US fund managers continued to be cautious.
The monthly survey of 12 firms showed the average equities allocation rising to 64.5 per cent from 61.4 per cent in June, while bonds fell to 28.3 per cent from 31.7 per cent.
The figures, however, were distorted by a change in sample. On a like-for-like basis, allocations remained more or less unchanged with a slight emphasis on bonds.
Cash, while still in the high end of its range over the past year, was four per cent, a decline from 4.3 per cent a month earlier. European investors' equity and bond exposure nudged up.
The poll of 11 major European fund management firms showed they raised exposure to stocks to 50.2 per cent in July from 49.5 per cent in June. Bonds rose to 41.5 per cent from 40.9 per cent, and cash fell to 3.6 per cent from 4.5 per cent.
Japanese fund managers cut their stock exposure head-ing into August and shifted their money into bonds as they became wary about global credit tightening and a possible slowdown in the US economy.
The July survey of 12 institutional investors showed allocations for stocks fell to 54.8 per cent, down from 55.8 in the July poll.
Bond holdings rose to 40.8 per cent from 38.4 per cent. Cash fell to 4.3 per cent from 5.7 per cent.
British fund managers cut their stock holdings.
The survey of ten asset managers showed average stock holdings down at 69.2 percent in July from 70.5 percent in June.