Why Fund Managers Are Buying Equities Even Though They Don’t Want To

Investors have increased their equity positions despite having concerns about the outlook for global growth and corporate profits, according to a monthly survey of fund managers by Bank of America Merrill Lynch (BAML).

A net 50 per cent of fund managers who responded to the survey are overweight equities, up from a net 45 per cent in the previous month’s poll. 

Increased risk appetite is also displayed by a drop in cash levels: a net 11 per cent of respondents are overweight cash, a fall from 18 per cent in March.

Despite this shift into stocks, however, fund managers are losing faith in the global economy, with the proportion of respondents who think the world economy will strengthen over the next year falling to a net 27 per cent, down from a net 58 per cent two months ago.

In addition, only a net 19 per cent now believe corporate profits will improve over the next 12 months, a drop from 32 per cent in March. 

‘Investors are reluctantly overweight equities,’ says Michael Hartnett, chief global equity strategist at BAML, in a release. ‘The combination of zero rates and rising inflation makes them fearful of bonds and cash.’ 

Much of the new equity investment has gone to emerging markets, reports the survey. A net 22 per cent of investors are overweight this region, a big jump from a net 0 per cent last month.

In total, 199 fund managers with a collective $566 bn in assets under management took part in the global survey.