Posted inEmerging MarketsNORDICSEquitiesFixed IncomeUnited States

Risk-on Danes still love Europe

Appetite for European equities is slightly below the record readings recorded in the first quarter, according to EIE’s freshest data, but it remains the most popular asset class with Danish asset allocators by a distance. Some 63% of them plan to increase their allocation, even slightly more than the European average. The Danish bullishness about European equities is a comparatively recent phenomenon, with the percentage of buyers exceeding 40 only in the final quarter of last year. Other European countries have had a much longer buying streak. 

 

American stocks had the absolute antipode of their European equivalents this year, but pessimism has been abating as Denmark’s fund buyers seem to have reduced their US equity weightings to more reassuring levels. In February, a record 44% of them were planning to reduce exposure to the asset class, much more than the mere 10% recorded in EIE’s most recent investor survey, below the Pan-European average of 17%. Buyers haven’t really returned to the stage though, and an overwhelming majority is foreseeing little action when it comes to their US equity allocation. Again, Danish investors follow the European trend here.

Yield hungry

The risk-on attitude of Danish investors is also reflected by their fixed income preferences. While most of their European peers are running away from emerging market debt, there are quite some buyers around in Denmark, especially for corporate bonds. Some 28% plan to increase their allocation to the latter, the second-highest reading in Europe after neighbouring Sweden. By contrast, (local currency) government debt is out of favour.

 

The risk-on mode of Danish investors is also reflected in sustained appetite for high yield bonds. During our previous poll of the Danish fund buyer community, demand for the asset class had shot up from record lows, and the country’s investors continue to be quite keen on the asset class, especially compared to investment-grade bonds. All investors who were polled are invested in the asset class, and only one of them told our researcher he intends to decrease his allocation. Most of the others plan to keep their allocation unchanged, while a significant minority (25% compared to the European average of 16%) intend to up their exposure in the next 12th months.  

Part of the Bonhill Group.