US-based fund managers cut their equity holdings in February and boosted cash to a nine-month high on persistent worries about a global economic slowdown, a Reuters poll found on Monday. Sharp market fluctuations have left many investors on the defensive. The volatility is based partly on worries that growth is slowing sharply in China where authorities cut the amount of cash banks must hold in reserve for the fifth time in a year on Monday.
US fund managers have steadily cut recommendations for stocks and increased allocations for bonds since the beginning of last year. The latest poll of 11 US money managers showed recommended stock holdings in a model portfolio fell again in February, to 51.9 percent from 52.5 percent. They are down almost four percentage points from a year ago.
"We lowered our equity weighting from overweight to neutral reflecting the persistent headwinds from the softer global economy, stronger dollar, and weak oil prices on corporate earnings," said Alan Gayle, senior investment strategist at RidgeWorth Investments. Recommended bond holdings were barely changed at 37.2 percent compared with 37.3 percent. That figure is up almost three percentage points from a year ago. Cash holdings increased to the highest since May to 4.4 percent from 4.0 percent in the previous month.
Regional breakdowns showed an increase in allocations for North American assets at the expense of emerging markets. "Risk remains high in emerging markets due to weak commodity prices, the strong dollar, and the large amount of dollar-denominated debt outstanding in many of these countries," said Jeff Layman, chief investment officer at BKD Wealth Advisors. In the fixed-income portfolio, fund managers increased North American bond allocation recommendations to 71.8 percent in February from 69.9 percent in January.
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