European funds raise stocks, cut cash for first time in 2011

European investors raised equities and cut cash for the first time this year while keeping their bond holdings largely steady, as those who bet the global economy would gradually pick up after the current soft patch bought risky assets. A survey of 17 Europe-based asset management firms outside Britain released on Thursday showed a typical balanced portfolio holding 47.6 percent of equities in June, an increase from 45.5 percent in the previous month.
They had reduced the proportion held in shares every month since February. It held 39.0 percent in bonds including government and corporate debt, compared with 39.5 percent in May, which was the highest level since September. Cash holdings fell for the first time since December to 7.1 percent from 8.8 percent, which was the highest level in at least a year. The poll was taken between June 21 and 29 when world stocks, measured by MSCI, rose more than 4 percent after hitting their lowest level in around three months.
Investors were still concerned about the slowdown in the United States and the rest of the global economy, and about how Greece would avoid a disorderly default on its sovereign debt, but were generally confident that growth momentum would pick up. The Federal Reserve completes its $600 billion bond buying programme this month and the European Central Bank is expected to raise interest rates again in July. But central banks are still providing ample liquidity in financial markets, offering a favourable backdrop for risky assets.
"The economic outlook is softening worlwide but on the corporate side, earnings growth is still improving Overall, this environment is still supportive for global stocks," said Giordano Lombardo, group chief investment officer at Pioneer Investments. Within equity portfolios, respondents trimmed North American holdings to 33.8 percent from 34.6 percent while they raised eurozone holdings to 36.9 percent from 34.0.
Fund managers cut euro zone bond holdings to 69.6 percent from 70.2 percent, while raising North American holdings to 16 percent from 14.7. Fund managers liked corporate bonds and disliked eurozone government bonds the most. They preferred IT services within equities. Their overweight level in this asset class rose to 0.6 percent, still half of the January level.