LONDON: European investors seeking to harness the lift from central bank monetary stimulus bet more money on stocks in March, lifting exposure to a multi-year high while easing back on bonds and safe-haven cash, according to a Reuters poll.
A monthly survey of 17 Europe-based asset managers and chief investment officers carried out between March 16-30 found the average allocation to equities in global balanced portfolios rose to 49.2 percent from 48.6 percent a month earlier.
Exposure to cash dropped a percentage point to 6.1 percent while bond allocations were also lower at 36.7 percent from 36.8 percent in February.
Investors attributed the move to efforts by the European Central Bank to stimulate a moribund economy with an ultra-accommodative policy, including low interest rates and a quantitative easing asset purchase scheme.
"Given a backdrop of ultra-accommodative monetary policy, low oil prices and a recovery in global growth, we continue to have a constructive view on global equities and prefer them over fixed income or cash," said Boris Willems, strategist at UBS Global Asset Management.
While the ECB is embarking on its stimulus, the United States Federal Reserve which introduced a similar policy after the 2008-9 financial crisis, continues to keep interest rates close to zero, though it is expected to start hiking this year.
"The ongoing commitment to reflation is likely to boost risky assets and will give equities more room to rally before a potential rate hike might cause more volatility," said Peter Bezak, portfolio strategist at Bank J. Safra Sarasin.
Investors also noted risks to their upbeat outlook for macroeconomic recovery and the knock-on effect on equities, such as markets taking fright from U.S. rate rises or new geopolitical instability such as renewed fighting in Ukraine.
"We recommend a selective approach and exercise caution in the short-term due to multiple sources of geopolitical risk and more frequent volatility spikes," said Monica Defend, Head of Global Asset Allocation Research at Pioneer.
To Raphael Gallardo, asset allocation strategist at Natixis Asset Management, the biggest chance of a market upset comes from a worse-than-expected slowdown in China.
"Greatest risk is the possibility of hard landing in China, although we believe the authorities have not exhausted the leeway of monetary policy. Greatest opportunity would be in emerging markets when and if we get clear signs that China's growth slowdown is over," he said.
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