Investors regain appetite for risk to realise higher return rates
INVESTORS have regained their appetite for risk despite rising concerns over the world economy and the corporate profit outlook, according to a new survey.
The latest monthly survey of fund managers by Bank of America-Merrill Lynch (BofA-ML) shows that investors are looking for higher return rates and are prepared to put their capital into riskier investments to get that return. Cash balances fell by 0.4pc last month to 3.7pc, the survey found.
Despite the return of risk, concerns about the world economy are growing. Only a net 27pc of those surveyed believe the world economy will strengthen over the next 12 months -- less than half the number in February.
The European outlook is even worse, with a net 8pc of managers believing the European economy will increase and more managers expecting earnings to fall in 2011.
In a statement, the company said that low interest rates were driving the market away from cash and bonds and toward equities.
A net 11pc of respondents are overweight cash, down from a net 18pc last month. Half of asset allocators are overweight equities, up from 45pc a month ago.
BofA-ML head of European equities strategy Gary Baker said: "The European macro outlook has taken a big hit this month on the back of worries over commodity prices, sovereign debt, a strong euro and rising rates. [Despite this], growth concerns did not trigger any big shift in sector allocations, leaving investors vulnerable to macro disappointment in our view."
Michael Hartnett, Merrill's chief global equities strategist, agreed.
"Investors are reluctantly overweight equities. The combination of zero rates and rising inflation makes them fearful of bonds and cash," he said.
Meanwhile, BofA-ML has launched a new fund with hedge fund giant Och-Ziff Capital Management aimed at institutional and retail investors in a number of European countries, including Ireland.
The Och-Ziff European Multi-Strategy UCITS Fund requires a minimum investment of $1,000 (€691).