Fund Managers Asset Allocation For July

In February, 16% of fund managers expected a weaker economy in the next 12 months, the lowest since December 2011. Investors are still pessimistic, with only 2% expecting a stronger economy in the next year. This explains the low allocations to equities and high allocations to cash.

fund managers economic growth expectations_baml survey july

Commodities: Allocations to commodities improved to a 3.5 year high at -4% underweight. This is neutral relative to the long term mean. In comparison, in February, allocations were near one of the lowest levels in the survey’s history (-29% underweight). The improvement in commodity allocations goes together with that for emerging markets.

fund managers overweight commodities_baml survey july

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Sectors: Relative to history, managers are extremely overweight cash. They are far more overweight bonds than equities. Overall, this is very defensive positioning.

longs shorts by sector_global fund manager survey baml july

Fund managers risk appetite is the lowest since July 2012, a level from which SPX rose 10% over the following two months.

level of risk investment managers survey_baml

A record percent of fund managers have bought downside protection for the next 3 months.

protection to investment portfolio survey baml july


Survey summary details are below.

  • Cash (5.8%): Cash balances increased to 5.8% from 5.7%. This is higher than in February (5.6%) and the highest since November 2001. Typical range is 3.5-5%. BAML has a 4.5% contrarian buy level but we consider over 5% to be a better signal. More on this indicator here.
  • Equities (-1%): A net -1% are underweight global equities, down from +1% in June and below the +5% overweight in February. Over +50% is bearish. A washout low (bullish) is under +15%. More on this indicator here.
  • Regions:
    • US (+9%): Exposure to the US Equities rose from -15% underweight in May to +5% overweight in July; this is the first overweight for the US in 17 months.
    • Europe (-4%): Exposure to European Equities dropped from +26% overweight in June to -4% underweight. This is the first underweight for Europe in 3 years.
    • Japan (-7%): Exposure to Japanese Equities was unchanged at -7% underweight. Funds were -20% underweight in December 2012 when the Japanese rally began.
    • EM (+10%): Exposure to EM Equities rose from +6% overweight in June to +10% overweight in July – a 22-month high. Exposure was -33% underweight in January when the regional rally began.  -34% underweight in September 2015 was the lowest in the survey’s history.
  • Bonds (-35%): A net -35% are underweight bonds, a rise from -64% in December but unchanged from-34% in June. This is near a 3.5 year high allocation. Note that global bonds started to underperform in mid-2010, 2011 and 2012 when they reached -20% underweight.
  • Commodities (-4%):  A net -4% are underweight commodities – a 3.5 year high – an improvement from -12% last month. Higher commodity exposure goes in hand with improved sentiment towards EM.
  • Macro: Just 2% expect a stronger global economy over the next 12 months; in February, 16% expected a weaker economy, the most pessimistic since December 2011.

Thanks for reading.


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