Data from Expert Investor’s research team on the 12-month forward looking buying and selling intentions of major fund selectors found that interest in acquiring European equities had fallen for the second quarter running.
While the sentiment was not negative, the survey responses could potentially signal future net outflows from the sector on the back of a very successful 2017, which saw €37.5bn of net inflows into European equity funds.
The data found that Swedish fund selectors had the lowest sentiment towards European equities compared to the rest of Europe as they preferred absolute return strategies, unconstrained bonds, emerging market corporate bonds, and global emerging market (GEM) equities.
However, the Swedes were not negative about Europe but rather neutral, and the majority were happy with their allocations. Their negative sentiment towards US equities continued.
“There is renewed interest in Japan and half of those who use the asset class say they want more. Sentiment towards Asia and GEM (equities) are positive and healthy, but there are a few more looking to decrease exposure to the latter,” the report said.
Danish fund selectors had their sights on absolute return strategies, global emerging markets, and property.
The data found that while the Danish macro view in general was overwhelmingly positive, fund selector views on equities were systematically less positive compared with the European average.
“There is still aggregate demand for Europe, although it’s far lower than six months ago. Asia and GEM are consistently positive, although lower than the European average,” the report said.
“Frontier markets has low use and there is very little movement either way. Global equity funds have taken a notable dip. The US remains the most negative asset class by a long shot.”
Similarly, Norwegian fund selectors disliked the US, and developed market corporate bond funds, but favoured unconstrained bonds, emerging market debt, frontier, and GEM, Asia and European equities, as well as absolute return and hedge strategies.
While they were positive on European equities, Norwegian sentiment was still below the European average.
“In contrast to other European countries, there isn’t an uptick in buying sentiment towards Japan and nearly all users are happy to hold allocations. As for global equity, about a quarter of users want more – a little above the European average,” the report said.
For fund selectors in Finland, sentiment toward European equities was still positive in aggregate but fewer expected to invest more than in previous quarters. The Finnish also liked GEM, frontier, Asian, Japanese equities, as well as absolute return strategies and emerging market debt.
Looking to forward performance predictions, fund managers were bullish on European ex UK equities, Japanese equities, and emerging market equities.
“…almost all fund managers believed Europe and Japan markets will be up in a year’s time,” the report said.
“GEM and Asian equities are strong and consistent, but less so than Europe and Japan.”