Tuesday, March 19, 2013

Fund Managers' Current Asset Allocation - March

The latest BAML survey of global fund managers shows near-record equity exposure, low levels of cash and the highest exposure to banks since December 2006. The charts are from an excellent post from Short Side of Long (here), a site I recommend bookmarking.
  1. "There is a big surge in optimism. The outlook for corporate profits and ample liquidity are keeping investors bullish. In short, investors rotated out of commodities, bonds and cash into equities," says BAML
  2. Cash balances remain very low at 3.8% (same as in January and February, vs 4.1% in December 2012). This is the lowest since February 2011. Typical range is 3.5-5%. Moreover, managers are now underweight cash for the first time since early 2011. More on this indicator here and see first chart below.
  3. Equity allocations - a net 57% are overweight global equities, a 6 percentage point increase from last month. This is the second highest equity exposure since the survey began in April 2001. In comparison, it was 35% in December 2012. More on this indicator here and see second chart below.
  4. Net 53% are now underweight bonds, an increase from 47% in February. This is the lowest weighting since May 2011. Third chart below.
  5. 72% expect the dollar to appreciate over the next 12 months, a whopping 30 percentage point increase over last month. This is the highest percentage of bulls in the survey's history. On the flip side, Yen bearishness is the lowest since 2002.
  6. EEM had been the most favored region (overweight 43% in February) but this fell to 34% in March. Only 14% expect a stronger Chinese economy in the next year, a massive fall from 60% in February.
    1. US is region most want to overweight. Managers are 14% overweight versus 3% underweight in January. 
    2. They are the most overweight (15%) Japan since 2007 (versus 7% in February and underweight by 20% in December).
    3. Europe was reduced to 4% overweight versus 8% in February and 15% in January
  7. Sector weighting reflect risk-on and skepticism over emerging markets.
    1. A net 14% globally are overweight banks, the highest since December 2006 (vs overweight 6% in February and net 25% underweight a year ago)
    2. Technology is 35% overweight
    3. Materials are 17% underweight, reflecting expected weakness in EEM
    4. Likewise, commodities are 11% underweight
    5. Telecoms are 28% underweight, the lowest in 7 years
  8. 61% expect global economy to strengthen next 12 month (59% in February), the highest optimism since April 2010
Read the February and January surveys as well.

Cash balances are low and fund managers are now underweight.

A net 57% are overweight global equities (solid yellow line). This is the second highest equity exposure since the survey began in April 2001.

53% are underweight bonds.

11% underweight commodities, reflecting negative sentiment towards emerging markets, especially China.