U.S. fund managers raised their exposure to equities in October and cut their high allocation to fixed-income assets following further impressive gains on Wall Street, a Reuters poll showed on Thursday.
Based on 14 U.S.-based fund management firms, surveyed Oct. 14-27, firms raised equity holdings for a second consecutive month, to an average 62.4 percent of their assets, compared with 61.7 percent in September and 61.5 percent in August.
September's rally drew money managers back into the market, as many had been reluctant to make huge bets in equities after an awful August.
After climbing 7.7 percent in September, the Dow Jones industrial average has gained 3.1 percent so far this month. For its part, the Standard & Poor's 500 is up 3.6 percent so far in October, following its gain of 8.8 percent in September.
U.S. stock markets have been supported not only by solid corporate earnings but by the likelihood of more monetary stimulus. The Federal Reserve is expected to announce another round of asset purchases when it holds its next policy meeting on Nov. 2-3, after already deploying $1.7 trillion to pull the economy out of the financial crisis.
"Risks abound, but they appear to be manageable," said Alan Gayle, senior investment strategist at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. RidgeWorth holds a "market-weighted" position to global equities.
The prospect of more market intervention by the Fed is again pushing U.S. bond yields lower, reducing the cost of borrowing dollars and encouraging investors to use those funds to buy assets such as stocks and commodities.
Small wonder then that exposure to fixed-income securities, including government and investment-grade and high-yield "junk" bonds, dropped for a second consecutive month to 30.4 percent in October from 31.1 percent in September, the Reuters poll showed.
Money managers are not entirely letting their guards down, however. Cash allocations remained 3.3 percent in October, the same as the previous month.
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