Technology is the most overweight and overvalued sector among European fund manager allocations in August, according to Bank of America Merrill Lynch (BofAML).
The bank’s latest fund manager survey found that 27% of fund managers said that they were overweight in the technology sector, followed by insurance at 12%, and oil and gas at 10%.
Technology and food and beverages were perceived to be the most overvalued sectors with 45% and 42% of fund managers believing the respective sectors were overvalued.
European fund managers were most underweight the utilities sector at 27%, followed by retail at 27%, telecoms at 16%.
Banks are now underweight at 6%, from an overweight of 7% during July – the lowest ratio since October 2016.
“Tech, insurance and oil & gas are the most crowded sectors, with tech being perceived as the most overvalued in history. utilities, retail and telecoms are least crowded, the latter seeing the lowest positioning in four years,” the report said.
Unlike global investors, European investors cut their cash levels to 4.3% during August from 5% in July, however, BofAML noted that this was still about the 10-year average of 4%.
UK stocks had the largest drop in allocation over the month of August in the history of the bank’s survey. Almost 50% of fund managers said they would be underweight the asset class compared to 4% during July.
Fund managers were more positive towards Italian stocks with 26% saying they would be underweight compared to 35% the month before.
The most favourable equity market was Germany with 33% saying they would be overweight the asset class over the next year. This was followed by France at 27%, and Netherlands at 18%.