During previous polls in February and October last year, about half of Barcelona’s fund selector community was in favour of Catalonia breaking away from Spain. This number has now almost halved to just 28%. The surprising poll result coincides with a large majority of delegates at last week’s Expert Investor Forum in Barcelona expecting another market correction to occur within 3 months.
Their macroeconomic outlook has deteriorated correspondingly. Back in October last year, six in 10 Catalan fund buyers were positive about wider economic prospects. This figure has dropped dramatically to just 28%.
When asked to identify the biggest market risks at the moment, fund managers presenting at the conference pointed at a range of threats, ranging from the migrant crisis to Brexit. Two of the speakers, however, each mentioned a more immediate, concrete risk in financial markets that both could lead to a market crunch.
“Worsening credit conditions are a big risk,” said Guy Barnard, manager of the Henderson Pan European Property Equities Fund. “Credit managers were signalling bear market coming for equities ahead of the equity market correction, and speaking to them now they are still seeing risk to the downside,” he added.
“The amount of bonds trading at 80 cents to the dollar is back at levels we haven’t seen since the financial crisis,” Barnard said, warning this could be the prelude to a sharp increase in bankruptcies and a sign of slowing global economic growth.
John William Olsen, manager of the M&G European Select Fund, pointed the finger at the usual suspect these days: emerging markets. “Emerging market debt is at the top of the risk list for me,” he said. “If you have have a lot of money moving into illiquid assets like EMD, you run a risk. If people want to get out, they get out fast. If you see spreads in EMD widen, you never know what’s going to happen and it could spread to other assets.”
Barcelona’s fund selectors are responding to the uncertainty by increasing their allocation to long/short equities. Just like in Portugal, the category now tops their buying list, with 54% of local fund buyers intending to increase their exposure in the next 12 months.
Click here to see a full overview of the delegate voting results from Expert Investor Barcelona.
And click here to see a selection of photos taken at the event.