Long-term investors cut back on equities in favour of bonds during the market ructions of July, but have far from abandoned equities as a favoured asset, Reuters polls showed on Tuesday.
Surveys of 47 leading investment houses in the United States, Japan, Britain and continental Europe showed investors cutting an average portfolio's exposure to equities to 60.3 percent in July from 61.2 percent in June. Bonds were the beneficiaries, rising to 32.1 percent from 31.8 percent. Cash was steady at 3.9 percent.
The shifts put equity holdings slightly below their long-term average but left exposure higher than it was throughout June to September last year. "As corporate earnings continue to move in a firm trend, stock investment will remain more attractive than bonds," said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management.
July's readings were taken as global financial markets reacted sharply to worries about instability in corporate debt markets and rising costs in corporate borrowing.
MSCI's main world equity index has fallen more than 4.5 percent over the past two weeks, albeit from all-time highs, and Citi's aggregate global bond yield has fallen more than 21 basis points.
Investors typically move from stocks to safe-haven government bonds and cash in times of uncertainty. Many investors, however, maintain a benign view of the investment climate, focusing on robust global economic growth, low inflation and good corporate performance.
"Fundamentals really haven't changed," said Brian Stine, investment strategist at Allegiant Asset Management. US investors shifted into safe haven government bonds in July and away from stocks, the regional Reuters poll showed.
The survey of 11 US-based fund management firms showed respondents holding 64 percent of their assets in equities, down from their allocation of 66.9 percent in June.
Respondents held 32 percent of their assets in bonds in July, up from 28.2 percent in June. Changes in the poll sample mean the July figures were not directly comparable with June, but an analysis of like-for-like responses showed bonds gaining slightly over cash and equities.
Japanese fund managers turned slightly positive about stock investment, however, after their equity allocations hit a five-month low in June. The monthly survey of 12 Japan-based institutional investors showed average stock allocations rose to 53.9 percent from 53.4 percent in June.
Allocations for bonds slipped to 40.1 percent from 40.6 while those for cash edged up to 6.1 from 6.0 percent. Continental European fund managers on average moved money out of equities into safer cash. The survey of 12 investment houses showed equity holdings stood at 50.6 percent while bonds holdings were at 37.1 percent. Cash was at 3.0 percent.
On a like-like basis with 11 fund management houses which previously participated in the poll, equity holdings fell while bonds and cash rose. British fund managers cut bond holdings and raised equity holdings, despite a shakeout in global markets, in the belief stocks look attractive relative to fixed interest securities.
A poll of 12 fund management firms, based on a sample that changed slightly from last month, showed average holdings of bonds fell to 19.2 percent from 20.0 in June. Equity holdings rose to 72.8 percent from 72.3 percent, while cash fell to 4.6 percent from 5.4 percent.