A monthly survey of 46 fund managers and chief investment officers in the United States, Europe, Japan and Britain found the average recommended allocation to stocks in global balanced portfolios fell 13 basis points in April to 50.47 per cent. Investors typically bet more on equities when they are feeling positive. They are relatively volatile assets that gain quickly in rising markets but can fall hard when economic conditions worsen. The average allocation to bonds remained broadly unchanged.
Exposure to cash, used as a buffer against volatility, rose slightly to 5.45 per cent from 5.3 per cent, the survey found. Participants said they were mindful of risks, including a mis-timed interest rate hike by the US Federal Reserve that chokes off a still-fragile global economic recovery and a faster-than-expected slowdown in China, the world's second- largest economy.
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"Any US tightening alongside global growth concerns could lead to a simultaneous fall in both bond and equity markets, something we haven't seen for many years," said Rob Pemberton, investment director at British wealth management firm HFM Columbus. Other potential upsets include Greece exiting the euro zone as negotiations over its debts remain fractious.
"The greatest risk remains a hard landing of the Chinese cycle, but authorities are now loosening monetary policy to contain the danger. A Grexit (Greek exit from the euro zone) is also a risk event but would have less systemic reach, although it would temporarily hurt European equity markets," said Raphael Gallardo, Asset Allocation Strategist at Natixis Asset Management .
The poll was taken from April 15-29, when world stocks advanced by close to one per cent, reaching a record high during the survey period. The US S&P 500 index was unchanged over the period, though the index touched an all-time high during the survey. Emerging market stocks gained 1 percent during the survey period and are trading close to seven-month highs.
US fund managers largely maintained the status quo on their recommended global allocations in April. The model portfolio comprised a 55 per cent exposure to equity and 36 per cent to bonds. The rest was spread evenly between alternatives and cash and a small percentage in property.
British investors stuck to their conviction that monetary stimulus around the world would boost markets, keeping their exposure to stocks at six month highs reached in March of 54.3 per cent.
Their allocations to bonds were eased slightly to 23.4 per cent from 24.2 per cent, while investors also cut safe-haven cash holdings to 7.1 per cent from 7.5 per cent.
European investors have started to position their portfolios to guard against market volatility. The average allocation to stocks fell to 48.8 per cent from a multi-year high of 49.2 per cent a month earlier.
The average European allocation to cash increased to 6.9 per cent from 6.1 per cent a month earlier. Exposure to bonds rose to 37.3 per cent from 36.7 per cent.
Japanese fund managers kept overall allocations of stocks and bonds largely unchanged with a 44.1 per cent allocation to equities. Their allocation to bonds ticked up to 50.6 per cent from 50.3 per cent, still within its 50-52 per cent range in the past six months.