US fund managers cut global equity allocations to the lowest level since 2007 and raised cash holdings in April on concerns about slower global growth, a recent Reuters poll showed. The survey of 13 US-based fund management firms taken between April 17-29 showed aggregate cash weightings in balanced portfolios at 3.3 percent in the month, up 1.5 percentage points on March and the highest since November.
The drop of more than 2.5 percentage points in recommended equity allocations in global portfolios to 57.4 percent from 60.0 percent marked the lowest at least since the financial crisis began in 2007. The consensus recommended equity allocation fell for the third month in a row in April even as the benchmark US S&P 500 index closed at a record high on Monday, up 12 percent so far this year.
"Looking across the sweep of asset classes we do still consider equities to be most attractive, but we are probably not as bullish as we were three months ago because early in the year the economic growth outlook was better than it looks now," said Daniel Pierce, senior portfolio manager at State Street Global Advisors. Regional breakdowns showed slight increases in US, British and Japanese equity holdings at the expense of the euro area. The euro zone is facing a difficult road out of recession and its biggest economy, Germany, is showing signs of strain.
The mood in company boardrooms and in households across the euro area has soured since March, after an optimistic start to the year. Partly as a result, a Reuters poll published last week predicted the European Central Bank will cut its main interest rate this week. Equity allocations to Latin America and Asia excluding Japan also fell. China's growth engine is not firing up as vigorously as many had hoped it would do by now. Its economic recovery unexpectedly stumbled in the first three months of this year.