Survey Shows Investor Pessimism Shifts to Japan, US

A new study shows fund managers are moving out of Japan and the US and into Europe.

(August 18, 2010) — Ahead of worries that the world’s largest economy may be weakening, a new survey by Bank of America Merrill Lynch Global Research shows money managers are slashing their holdings of US and Japanese equities this month, while their demand for eurozone equities is growing.

According to the study, 14% of respondents, who manage about $513 billion in total, were underweight in US equities, compared to 7% overweight in July. Additionally, 27% were underweight in Japanese equities, compared to just 7% in June. On the other hand, in August, 11% of investors were overweight in eurozone equities, compared with a net 10% underweight a month earlier – the most positive reading since October 2009. Investors were also more bullish on UK equities than they have been for more than three years, the survey stated.

Furthermore, research found that global emerging markets have increased in popularity, as concerns about a weakening of the Chinese economy have subsided. The August survey showed 19% expected the Chinese economy to weaken over the next year, down 20 percentage points from July. This improved outlook was supported by a shift toward commodities, Merrill said.

“The spotlight of investor pessimism has shifted away from China and Europe to Japan and the US,” said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Global Research, in a release. “Investors clearly remain cautious, so better news on US growth and fiscal policy would be a pleasant surprise.”

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Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research, added: “Investor sentiment on Europe has staged a remarkable recovery in the past few months, underpinned by greater optimism about Europe’s banks. Economic data now has to continue to support this shift.”

In all, 187 fund managers, managing a total of $513 billion, participated in the global survey from August 6 to August 12. Some 157 managers, managing $327 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Survey: Infrastructure Investors Step Up Investment; Find PE Model Inappropriate

While more investors are looking to invest in the asset class, many are questioning whether the management fees and fund carry structure of private equity are appropriate.

(August 18, 2010) — According to a recent Preqin survey, about 70% of institutional investors that invest in infrastructure plan to make additional investments during the next 12 months, up from 40% last October.

Meanwhile, the survey revealed that many feel it is unwise for managers of unlisted infrastructure funds to apply the private equity model in the fees they charge, as investors and infrastructure fund managers have been debating whether the management fees and fund carry structure of private equity are appropriate for the long lifetimes of infrastructure assets. According to the study, one respondent was quoted as saying “The fee structure is set up for an asset class capable of returning 20 percent, but expected infrastructure returns are much lower than that.”

Additionally, 73% of the institutional investors surveyed by the market research firm Preqin disagreed or strongly disagreed that the interests of the fund manager and investors are well aligned. These respondents argued that the long-term characteristics of infrastructure assets do not match the ten-year term of a traditional private equity fund. An additional quarter of investors argued that there needs to be greater interaction between investors and fund managers when making investment decisions.

In terms of geographic opportunity, 22% percent of respondents believe the greatest infrastructure investment opportunities are in North America, while 20% reported Western Europe and 19% stated emerging markets, with the remainder spread among other locations.

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Preqin’s study was conducted in June and studied responses from 65 institutional investors around the world.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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