Fund managers bet on peak rates and buy bonds
Fund managers have built the highest level of exposure to bonds since the financial crisis, according to the latest Global Fund Manager Survey from Bank of America.
The survey of 225 participants, showed funds had their third-highest bond overweight position in two decades as investors bet global interest rates will move lower next year.
More than three-quarter of respondents believed the US Federal Reserve’s rate-hike cycle has now ended, up from 60 per cent the previous month. This was the highest level of conviction received since the poll began asking investors.
The global growth outlook, meanwhile, remained muted. More than half of those surveyed expected a weaker global economic performance next year, but there was little concern of a significant recession.
Just under three quarters of investors predict either a ‘soft’ or ‘no’ landing for the global economy over the next 12 months. Further, only 21 per cent of respondents expected a ‘hard’ landing, down from 30 per cent.
Fund managers also reported an overweight equity position for the first time since April last year. Average exposure went from a net underweight of four per cent to a net overweight of two percent.
In contrast, fund managers’ cash holdings fell to a two-year low. The average cash level fell to 4.7 per cent of portfolios from 5.3 per cent last month.
More than half of investors surveyed expected bonds to be the best performing asset in 2024.