07/12/2011
By Ilonka Oudenampsen
Concern over the eurozone debt crisis has significantly increased since the last quarter, with European equities subsequently falling out of favour with intermediaries, according to Barings Investment Barometer survey.
For 89% of respondents, the eurozone crisis is the biggest global macroeconomic challenge facing investors, compared to 78% in the last quarterly survey. Moreover, 58% of investment professionals now say they are unfavourable towards European equities, up from last quarter’s 32%.
Fears of a ‘double dip’ recession have increased too, with 28% citing this as one of the biggest global challenges in the next six months, compared to 15% in the previous quarter. The prospect of a second banking crisis is seen as a prominent challenge facing investors by 61% of respondents, compared to 41% of those questioned for the last survey.
With 93%, emerging markets are the most favoured asset class, while 44% are advising their clients to increase exposure. On second place is Asian ex-Japan equities (90%), followed by global equities (84%). Favourability towards gold has decreased from 71% to 59% and European equities saw a drop in favourability from 69% to 42%.
Like last survey, around two thirds (67%) are favourable towards fixed income, with 21% advising an increase in exposure (up from 14%). Seven in ten respondents are negative on cash as an asset class, with 82% saying their clients are concerned about the impact of inflation on cash investments.
In line with the previous surveys this year, 63% of advisers encourage their clients to diversify their assets in order to navigate the current levels of market volatility, while 43% focus on identifying growth opportunities and 41% on de-risking.
Rod Aldridge, head of UK retail distribution at Barings, said: “The eurozone crisis is clearly rooted in the consciousness of investment advisers. This uncertainty is having an impact on their decisions as they exercise caution and encourage diversification of assets and de-risking.
“In the search for growth, our survey shows emerging markets are front of mind for many investors, which is testament to the compelling opportunities that these markets continue to offer. However, as caution prevails, fixed income also remains popular. More than ever, the benefits of a balanced approach are clear.”
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