Institutional investors are taking on a bit more risk amid growing confidence in the global economy and expectations of U.S. interest rate hikes, according to the latest fund manager survey from Bank of America Merrill Lynch.
The firm reports that investors “have regained some appetite for risk” amid higher growth and inflation expectations; and they have cut their cash holdings and increased their exposure to equities, real estate and alternative investments.
The latest investor survey, which was carried out earlier this month, found that the proportion of asset allocators that are overweight in equities rose significantly, by 17 points to a net 43%, while those overweight on cash were reduced to their lowest level since July.
These shifts in risk appetite come as four-fifths of respondents now expect the U.S. Federal Reserve Board to raise interest rates during the current quarter and confidence in the global economy has rebounded. In addition, the BofA Merrill Lynch report notes that concerns about a slowdown in China have abated.
By region, the report notes that the eurozone and Japan are the most favoured equity markets. Furthermore, it adds that overweights in real estate and alternative investments also rose to their second-highest levels in the survey’s history. Conversely, it says that investors remain aggressively underweight on commodities and emerging markets.
The latest survey involved an overall total of 201 panellists with US$576 billion in assets under management and carried out from Nov. 6 – 12.