Japanese fund managers increased the assets in their model portfolio allocated to bonds in March amid geopolitical risks stemming from the Ukrainian crisis and concerns about China's slowing growth, a Reuters poll showed. The survey of eight Japan-based fund managers, polled between March 17 and 24, also found they had slightly reduced their equity allocations in March after raising those weightings to a 2-1/2-year high the previous month. The overall allocations to bonds rose to 48.1 percent in March, the highest level since November 2013, from 46.8 percent last month.
The allocations to stocks dropped to 44.9 percent from 46.1 percent, which was the highest since October 2011.
Within the bond portfolio, they raised US/Canada weightings to 29.1 percent, the highest since May 2013, from 24.9 percent last month.
Tensions between Ukraine and Russia over the Crimean peninsula and a string of indicators that pointed to slowing economic growth in China buffeted the global markets in March, prompting investors to seek safe havens in government bonds.
Investors also kept in mind the likelihood that the US Federal Reserve would continue tapering its economic stimulus as planned, spelling an eventual end to its quantitative easing policy.
"The potential increase in geopolitical tension remains a factor regarding bond investments. But we have to bear in mind the risk of bond yields rising as there appears to be no change to the Fed normalising monetary policy," said a fund manager at a Japanese asset management firm, who could not be identified because of his company's policies.
New Federal Reserve chair Janet Yellen earlier this month suggested the possibility of raising interest rates early next year.
Fund managers shed exposure to euro zone bonds to 21.1 percent from 24.3 percent.
Still, that was significantly higher than in mid-2012, when the weighting fell to as low as 15.9 percent in the depths of the euro zone's sovereign debt crisis.
The surveyed fund managers slightly pushed up their US/Canada stock exposure to 34.8 percent, the highest since April 2012, from 34.3 percent.
The S&P 500 index continued its sustained bull run, hitting a record high last week, supported by optimism that soft economic indicators seen earlier this year was due to severe weather conditions.
Among emerging market stocks, fund managers cut weightings on Latin America to 0.8 percent, the lowest since February 2008, from 1.5 percent.
MSCI's benchmark stock index for Latin America has hovered near a 4-1/2-year low hit in February on the back of emerging market growth concerns.
Fund managers' weightings on Japanese shares stood unchanged at 37.5 percent, although the figure could drop slightly depending on the economic impact of a sales tax hike effective on April 1. Japan's Nikkei share average has fallen around 10.5 percent so far this year, underperforming most of its peers.
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