Tags: Fund | Managers | Stocks | Bonds

Fund Managers Scoop Up Stocks, Bonds in Volatile Market

Thursday, 29 Jul 2010 02:46 PM

 

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U.S. fund managers bumped up their exposure to equities and corporate bonds slightly in July, reflecting the huge appetite for yield and the relative value perceived in these sectors when compared to other asset classes, a Reuters poll showed on Thursday.

Based on 12 U.S.-based fund management firms surveyed between July 14 and 28, the poll found they held an average of 65.0 percent of their assets in equities, compared with 64.8 percent a month earlier.

Bond exposure rose to 29.8 percent from 29.5 percent.

"The primary attraction for us is valuation," said David Joy, chief market strategist of Columbia Management Investments, a subsidiary of Ameriprise Financial.

"What would change our mind is if the (U.S.) economic data persists in its current softness, and it all of a sudden makes forward earnings estimates apparently unrealistic."

Financial markets were rattled last week following Federal Reserve Chairman Ben Bernanke's observation on growth, saying the "economic outlook remains unusually uncertain."

U.S. investors have been whipsawed by impressive second quarter earnings from Corporate America, while housing and employment data have been weaker.

The U.S. government is expected to report on Friday that growth slowed to a 2.5 percent annualized rate in the April-June period from a 2.7 percent pace in the first three months of 2010.

Investors have hedged themselves by holding not only Treasuries but also higher-yielding investment-grade bonds.

Joy added: "We don't expect a double dip (in the economy). Because of that, we don't see a lot of value (in Treasuries) at these levels."

His firm has instead looked to single As, triple BBBs, and even BBs in the high-yield spectrum for value and income.

But U.S. investors have moved toward equities and corporate credits at the expense of alternative assets, including gold and gold securities.

Money managers held an average of 2.0 percent of such assets in July, down from 2.4 percent in June, while cash exposure also moved in the same direction at 2.0 percent in July, down from 2.2 percent one month earlier.

© 2014 Thomson/Reuters. All rights reserved.

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