The Phaserl


Our survey said

from Sovereign Man:

“It is because the public are a mass – inert, obtuse and passive – that they need to be shaken up from time to time so that we can tell from their bear-like grunts where they are – and also where they stand. They are pretty harmless, in spite of their numbers, because they are fighting against intelligence.”
– Alfred Jarry, ‘La Revue Blanche’, 1897.

What – if anything – can we conclude from the latest Bank of America Merrill Lynch Global Fund Manager Survey ? The survey was conducted between March 4th and March 10th among 209 panellists managing an aggregate $591 billion in assets. Most types of investment life forms participated, including pension funds, insurers, hedge funds and mutual funds. (Somewhat disconcertingly, the single largest cohort of investment managers described their investment time horizon as “3 months or less”. That sounds less like disciplined fund management and more like speculative trading.)

Among the highlights:

  • Cash levels were down from their recent high of 5.6% in February. This, with hindsight, was an “unambiguous buy signal”, since which point stock markets have risen by 11%, high yield by 7%, and oil by 31%. But cash, at 5.1%, is still a shade above its 3-year average of 4.8%.
  • The monthly jump in allocation to commodities was the biggest on record.
  • March also saw a big jump in fund managers’ exposure to industrials, resources and
    emerging markets.
  • Managers now have their second highest allocation to real estate and REITS in
  • High yield markets are now expected to outperform investment grade credit.
  • The biggest perceived “tail risks” are in the failure of quantitative easing, a US
    recession, and a renminbi devaluation.
  • Only 15% of managers expect a recession, but 59% of those surveyed said that the
    economy was now in a “late-cycle” phase.
  • The euro is seen as at its cheapest since April 2003.

Surveyed managers “remain structurally long US consumption plays and short China production plays” but investor conviction is low.

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