Tuesday, January 15, 2013

Fund Managers' Current Asset Allocation - January

There was a notable increase in bullish fund manager behavior over the past month. The highlights from the January BAML fund manager survey are as follows:
  1. Cash balances have dipped to a very low 3.8% (4.1% in December 2012), lowest since February 2011. The typical range is 3.5-5%.
  2. Equity allocations: a net 51% of fund managers are overweight equities (highest since February 2011). Just 35% overweight in December
  3. Overweight Eurozone equities by 15% (vs 7% December), the highest in 5 yrs. Other markets: 
    1. EEM overweight by 40% (vs 38% in December)
    2. Overweight Japan 3% (vs underweight 20% in December and underweight 34% in November 2012). 
    3. Underweight US by 3% (vs overweight 5% in December).   
  4. Overweight global financials for first time since February 2007 ($XLF) 
  5. Sector weighting in telecoms (underweight by 25%) lowest level since December 2005; largest fall is pharmaceuticals (overweight by11%, down 24% from December 2012).
  6. Allocations to bonds fell to its lowest level since May 2011, net 53% underweight. 
  7. 49% expect government bonds to be sold to fund purchases of higher beta equities ($TLT)
  8. "Risk appetite among fund managers has hit its highest level in nine years and is hovering near all-time highs" says BAML.
  9. 59% expect global economy to strengthen next 12 months, the highest optimism since April 2010
If fund managers are the most bullish since January 2004, then note that year was a sideways chopfest. Low in August before rocketing in October thru year end.