US fund managers back into equities on Greek relief

US fund managers tiptoed back into equity markets in June for the first time in two months and decreased bond exposure on hopes Greece will avoid default, a Reuters poll showed on Thursday. The poll of 15 US-based fund management firms, taken between June 20 and 29, found an average of 63.9 percent of assets in equities, up from 61.6 percent a month earlier and 63.3 percent in April.
In contrast, fund managers decreased their holdings of bonds to 28.5 percent in June from 30 percent in May and 29 percent in April. Cash exposure remained at 3 percent in June, the poll showed.
Recent fears of weakening global economic growth tied to persistent worries including Europe's debt troubles had led US managers to maintain less risky portfolios in recent months. But in June, investors stepped back into heavily battered stocks on hopes of a resolution to Greece's crippling debt problems.
On Wednesday, the Greek parliament approved the first of two austerity bills aimed at preventing the country from going bankrupt but expectations of at least a temporary solution to the country's debt crisis had built up beforehand.
Greece's government must now win approval on Thursday for legislation detailing specific implementation measures for its 28 billion euro austerity package. For more see
"I'm not surprised with how equity markets have made a comeback ... all because of Greece," said Kevin Rice, quantitative analyst at Nuveen Asset Management, with $200 billion in assets under management. "We have been watching how Greece is playing out and any contagion effect or fallout."
Wall Street closed its best three-day run in the past three months on Wednesday after the Greek parliament approved the austerity measures.
As of Wednesday, the Standard & Poor's 500 Index was just 1.39 percent away from a breakeven second quarter. Investors continue to brace for a rocky second half. The United States faces numerous headwinds including falling home prices, the nation's elevated unemployment rate and rising energy and food prices which have sapped spending power.
Even the United States' chief economist downgraded his forecast for economic growth. Last week, Ben Bernanke and his Federal Reserve estimated the economy should grow 2.7 percent to 2.9 percent this year, down from a range of 3.1 to 3.3 percent forecast in April.
Bernanke, in a wide-ranging question-and-answer session with reporters last week which touched on issues as diverse as Greece's economic woes and the size of reserves that big banks should hold, conceded that US economic hopes were partly hostage to events in Europe.