Italian investors enter 2012 slightly overweight cash

Italian fund managers are slightly overweight cash and have trimmed bond allocations after the latest EU summit failed to soothe worries over the euro zone debt crisis and the ECB dashed hopes it would ramp up its debt purchases, a Reuters poll shows.
Investors in the poll, released on Monday, were uneasy about the future of the euro currency bloc given the prospect of economic stagnation and the threat of credit ratings downgrades across most of the eurozone.
"The greatest risk in our portfolio is represented by the volatility of sovereign bonds, especially Italy," said Nicola Trivelli, CEO of Sella Gestioni.
Sella Gestioni was heavily overweight on cash this month while underweighting stocks, especially financials and, to a lesser extent, bonds.
The survey of 13 Italy-based asset management firms showed cash levels inched up on average to 9.4 from 9.1 percent of a typical balanced global portfolio while allocations to bonds, both government and corporate, fell to 43.3 from 45 percent.
Participants trimmed overall positions on government securities, to 67.5 pct from 68.8 pct, while looking for returns in investment grade debt, where positions rose to 19.3 pct from 18 pct.
Corporate bonds were also the biggest overweight in global bond portfolios together with US Treasuries. On the other hand, Japanese government bonds remained by far the most underweight because of their unattractive yields.
Surprisingly, equity holdings rose for the third month in a row to 42.6 percent, but that was largely due this month to the sizeable increase of just one participant.
"It's a tactical increase to ride possible market rebounds because we believe the political situation has improved and in light of the positive impact of the ECB intervention," said Fabrizio Fiorini, chief investment officer of Aletti Gestielle, the asset management division of Banco Popolare. It raised equities to 60 percent from 40 percent in November.
At the beginning of the month the European Central Bank cut its key interest rate by 0.25 percent to 1 percent and adopted unprecedented measures to sustain liquidity and prevent the debt crisis from precipitating a credit crunch that would choke the bloc's already fragile economy..
With yields of "core" bonds at multi-year lows, equities continue to look a relatively more attractive investment to some, although sector bets remain defensive.
Asset managers were, on average, slightly overweight stocks but the preferred sector was consumer staples, typically resilient to an economic slowdown.
Financials remained by far the most underweight sector because of their exposure to sovereign risk.