Fund managers’ EM allocations turn positive

Emerging markets sign1Fund managers slightly increased their average allocation to cash to a high 5.5% in May, up from 5.4% in April, as they prepared for a “summer of shocks”, a survey has found.

But the BofA Merrill Lynch Fund Manager Survey also reflects positive sentiment towards emerging market.

The Brexit is one of those possible shocks that fund managers globally are concerned about and UK equity allocations have fallen to their lowest since 2008.

However, an overwhelming majority of investors, or 71% of the 168 global survey participants, thought Brexit was unlikely or not at all likely to happen.

Another finding in the survey is that investors have rotated into emerging markets, energy and discretionary, away from UK, US, tech and industrials.

Emerging markets equity allocations turned positive for the first time in 17 months, with a net 2% of investors overweight.

Nearly 40% of those surveyed expected the European economy to strengthen over the next 12 months, up sharply from 6% from those surveyed in April. Eighty-six per cent said they did not expect a European recession.

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