Tuesday, January 17, 2012 12:03:46 PM
Institutional Investors: Risk-On in 2012
Asset allocators have started the year with the largest ‘about turn’ in investment confidence in over two and a half years.
(January 17, 2012) -- Institutional investors regained more
confidence in the global economy in January than in the last 30 months, and are
ready to take on more investment risk, a major survey has shown.
Just 3% of asset allocation specialists, with over $818
billion in combined assets, told the monthly Bank of America Merrill Lynch Fund
Manager survey that they believed the global economy would weaken in the next
12 months.
This figure was significantly lower than the 27% of them who
reported the same sentiment in December and was the sharpest drop since May
2010.
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Bank of America Merrill Lynch’s Composite Risk and Liquidity
Indicator was the highest since July last year, indicating investors are more likely
to take on risk.
The average level of cash in portfolios has also fallen from
4.9% in December to 4.4% this month.
Michael Hartnett, Chief Global Equity Strategist at Bank of
America Merrill Lynch Global Research, said: “Investors are tip-toeing rather than hurtling
toward higher risk exposure; the US market and high quality cyclical sectors,
such as energy and tech, have been the main beneficiaries of lower cash
holdings.”
Last week, MFS Chief Investment Strategist James Swanson
told aiCIO that technology stocks
were some of his
main picks for outperformance in 2012.
The proportion of investors taking lower than normal levels
of risk has improved to a net 33% of the panel, compared to a net 42% in
December.
However, the survey said that investors had become more
concerned about geopolitical risk than a month earlier. It said the proportion
of respondents viewing geopolitical risk as “above normal” had jumped to 69%
from 48% in December.
Europe – and more specifically the Eurozone, which saw
several of its member states downgraded last week – remained unpopular with investors.
Gary Baker, Head of European Equities Strategy at Bank of
America Merrill Lynch Global Research said: “Despite improvement in global and
European growth expectations asset allocators remain deeply sceptical towards
European equities, especially banks.”