The majority of fund buyers attending Expert Investor Spain in Madrid yesterday are planning to increase their allocation to alternative equity products instead. The move might be interpreted as a response to increasing uncertainty over return prospects in equity markets in the months to come.
Ian Lance, portfolio manager for the RWC Global Enhanced Dividend Fund who presented at the conference, pointed at the strikingly low volatility in equity markets right now.
“The last time the Vix-index [a measure of the volatility of stock markets] was this low was in 2007. What normally follows after such lows is not fantastic,” Lance said, implying investors might do well preparing for the worse.
Lance’s cautious view was not shared entirely by the other fund managers presenting at the conference. “We have now found ourselves in this low interest rate environment for a very long time, and maybe that’s the reason that volatility is muted,” said Thomas Angermann, portfolio manager of the UBS Small Caps Europe Fund. Patterns from the past might therefore not necessarily be applcable to today’s world, he argued.
Surprise bond bulls
Besides alternative equity products, government bonds are also surprisingly popular among the fund selector audience in Madrid. Some 58% of attending fund selectors said they consider themselves bulls on the asset class, while only 17% have a bearish outlook. This contrasts sharply with Pan-European sentiment on government bonds. A majority of European fund selectors is decreasing their exposure or does not presently use the asset class.