Fund managers nervous about European equities

There was a heavy shift away from European and UK equities towards global and emerging markets bonds in the first quarter of 2010 as fears about the European debt crisis took hold.

According to HSBC’s quarterly Fund Managers Survey, at the end of 2009 half of the managers surveyed were neutral and half overweight towards equities, but by the end of March a fifth of managers were underweight towards equities.

The most dramatic flows were seen into global bonds, which increased by more than 22 per cent, and high yield/emerging market bonds, which grew almost 10 per cent. Global equities saw outflows of 5.8 per cent or US$12 billion.

These results showed that fund managers had become less bullish on equities as the European debt crisis continued to impact the global economic recovery, according to head of global investments for HSBC in Australia Charles Genocchio.

An increasing number of managers were bullish on emerging markets equities and bonds, with more than half underweight to European equities. North American assets remained attractive with only a tenth of managers underweight to US equities.

Investors were reacting quickly to global volatility, Genocchio said. “In general, investors remain cautious, favouring bonds that provide diversified exposure and equities in regions such as the US and emerging markets, where economic recovery is more apparent and sustainable,” he said.