British investors cut equity allocations in September to their lowest in three years, buying more bonds and property as their fears of deteriorating world growth appeared to be confirmed, a Reuters poll found. The monthly survey of eight investment managers based in Britain showed average exposure to shares fell more than six percentage points from August to 47.6 percent, just under June levels, which were a three-year low.
The poll was conducted from September 19 to 29, coinciding with a plunge in world stocks after the US Federal Reserve cited fragile world growth as a prime reason for delaying its first interest rate rise in nine years. The Bank of England is now not expected to raise rates until next year. Only two poll respondents said they still expected the Fed to raise rates in 2015 and some saw central bank errors as a major risk on the horizon.
"Any errors of judgement in US central bank policy at this delicate stage could be devastating for global economic growth, especially when there are some sceptics already predicting a US recession for next year," said Peter Lowman, the chief investment officer at Investment Quorum. The allocation to North American shares was cut the most, to 21.5 percent from last month's 31.6 percent. Euro zone stock holdings were raised by 2.7 percentage points to 18.8 percent, possibly in anticipation the European Central Bank will expand its quantitative easing programme.
Major fears revolved around China and emerging markets, which are suffering an investor exodus amid tumbling commodity prices and the slowest growth in more than a decade. World stocks are down 5 percent this month, and Britain's commodity-heavy FTSE index is set for its worst quarter since 2011.
Investors kept cash allocations near last month's 6 percent but upped the share of bonds by 3.5 percentage points to 25.8 percent. The average weight of US debt rose to 33.8 percent, the highest since June. Property allocations rose to 6.5 percent from 5.1 percent last month, the highest level in at least five years. Investors continued to steer clear of emerging markets even though equities have fallen for five straight months for year-to-date losses of almost 20 percent. Emerging debt market returns are also deep in the red. "There are better opportunities in markets where economic growth has greater momentum," Mark Robinson, chief investment officer of Bordier (UK) said, citing the United States and Europe.