I am a fan of the Bank of America Global Fund Manager Survey. Not only because this survey covers many important investment themes or because the respondents are exclusively investors, as opposed to “connoisseurs” who give their opinions from the sidelines. The survey also regularly exposes the inconsistent behaviour of investors.
This was also the case in the most recent version in March. The chart below shows that for months there has been a large gap between what fund managers think of the economy and their share positions. Expectations for future economic growth have fallen to their lowest level since October 2008. Despite this, fund managers on average are still overweight equities.
Fund managers think they are cautious
But it does not stop there. When asked how much risk fund managers think they are taking in their portfolios, the majority replied that their risk level is “less than average”.
Of course, it is not impossible to take on lower-than-average risk with an overweight equity position. But it does raise some questions, as equities are usually the riskiest asset class. In addition, the fund managers indicate that they are overweight energy and technology stocks as well as marginally overweight emerging markets. These are precisely three of the most volatile asset classes in current market conditions. Not to mention the fact that market volatility is extremely high at the moment anyway.
Positioning
Based on the data from the Global Fund Manager Survey and the pieces I have seen on this platform and elsewhere, it is plausible to assume that many investors are still overweight equities. If sentiment deteriorates further, many fund managers will feel pressure to reduce risk to avoid further losses. By the way, you may wonder whether I also belong to that group.
Jeroen Blokland is founder of True Insights, a platform that offers independent research to build diversified multi-asset portfolios. Blokland was most recently head of multi-assets at Robeco. His “chart of the week” appears every Monday on InvestmentOfficer.lu.
This column originally was published in Dutch on InvestmentOfficer.nl. on 17 March.