Study: European Asset Owners Increasingly Favor Fundamental Equity Strategies

(November 25, 2009) – European asset owners increasingly are turning to “old-school” qualitative strategies, according to a survey by J.P. Morgan Asset Management.

The data—conducted via the firm’s European Equity Survey, which included responses from 194 institutional investors, including 80% of Europe’s largest asset owners—show that more than half of those polled are more inclined than in 2008 to favor a fundamental approach of valuing equities based on earnings and growth forecasts. Only 10% admitted that they were more likely to favor quantitative strategies than they were a year ago.

This does not mean that underlying asset allocation targets have changed, however. According to the study, 61% of European institutional investors will retain their current equity targets, while 44% stated that large-caps will outperform small-caps over the next 12 months. Emerging markets and Asia ex-Japan also are expected to be outperformers in the coming year.

However, European investors—as opposed to institutions from the United Kingdom (U.K.) —seem to favor conservative allocations, with the average equity target at 29%, fixed income and cash at 57%, and 13% in alternatives such as private equity and hedge funds. U.K. investors, on the other hand, have on average 56% in equities, 31% in fixed income and cash, and 14% in alternatives.