Asset Allocation Investment Ideas if you think most of the Fund Managers got it wrong
Asset Allocation: some interesting findings came from Bank of America that published the May 2020 Fund Manager Survey where they interviewed close to 200 Investors about current allocations and views. Some of the readings are quite extreme in the historical context.
This is also another reason to stick with the Passive Index Funds approach (that you may want to protect in case of shorter investment horizon)
Summary of Findings
Here are some Contrarian trade ideas from Bank of America based on their Survey – note that these are pretty aggressive/risky based on current environment:
- Sectors: Investors looking to play upside: short US tech, long
- Geography: long Europe-short US; Fund managers are long U.S. equities and short euro-zone stocks, the poll shows.
- Value vs. Growth Stocks: Investors looking to play structural
reshoring theme…long value-short growth, long small cap-short large cap.
68% of Managers believe this is a bear market rally
The most crowded trades are US Tech, Growth and US Treasuries
The most feared tail risk is Coronavirus Second Wave
Bank of America notes:
• The dominant concerns of investors since 2011 have been Eurozone debt &
potential breakdown; Chinese growth; populism, quantitative tightening & trade
wars; now global coronavirus.
• Now, Coronavirus 2nd wave dominates with 52% of FMS investors saying it is the top “tail
risk”; #2 Permanently high unemployment, #3 Break-up of the European Union, #4
Systemic credit event.
Net 4% of Investors believe Gold is Cheap
US Equities are preferred to European ones to the highest degree since the European Sovereign Crisis in 2011
Investors are Underweight Energy, Industrials and Materials - Value Stocks are net sold at this stage
Cash is at highest levels in portfolios since 2016
Bloomberg also noted that the latest BofA survey showed a marginal reduction in cash levels to 5.7%, which is still well above the 10-year average of 4.7%, while bond allocation jumped to the highest since the 2009 financial crisis. Exposure to equities in May rose 10 percentage points to a net 16% underweight after hitting the lowest level since 2009 last month, according to BofA.