Global fund managers are piling into US equities, in spite of the majority of them viewing the asset class as expensive.
The latest fund manager survey from Bank of America Merrill Lynch (BoAML) found that the number of managers with an overweight position in US equities was a net 24 per cent.
The figure was substantially higher than the net 15 per cent of respondents who said they had an overweight position in US equities in the December 2014 survey.
However, January’s survey also found a net 75 per cent of respondents thought US equities were “overvalued”.
According to BoAML, more fund managers thought US equities were expensive than at any point since the question first entered its surveys in 2001, including during the lead-up to the financial crisis.
A large majority of the respondents, 66 per cent, also thought investing in US dollar assets was the most crowded trade in the market.
But more and more managers were buying US stocks.
The large number of investors flocking to US equities also came in spite of the increasing number of managers becoming bearish on global economic prospects.
The survey found the percentage of managers that thought the world economy would improve in 2015 had fallen by nine percentage points between December and January, down to 51 per cent.
The US equity market was one of the best-performing markets in 2014 as the S&P 500 generated a total return of 13 per cent in dollar terms, whereas the MSCI World excluding US index had a total return of just 6.1 per cent in the period.
The US has also been one of the best-performing markets since the financial crisis, with the S&P 500 and Dow Jones Industrial Average index consistently achieving new highs.
But the current valuation of the S&P 500 puts it at a price-to-earnings ratio of between 15 and 16 times, which is only slightly more expensive than other developed world markets and its own history.
The survey suggested managers had been funding their move into US equities by selling out of every other major equity region.
The number of respondents with an overweight position in European and Japanese equities was still in net positive territory.
But the number of investors overweight in Europe fell from 26 per cent to 20 per cent, while for Japan it fell from 40 per cent to 34 per cent –although the country remains the biggest consensus overweight from global managers.
Investors continued to avoid the UK, but the biggest loser in terms of equity market regions in the latest survey was emerging markets, which saw investors bail out in droves.
The survey found that a net 13 per cent of respondents now had an underweight position in emerging market equities, which had plunged from a reading of neutral in December.
In addition, global fund managers increasingly feared that there would be some sort of crisis in emerging markets this year.
The BoAML survey took place between January 9 and January 15, and generated a response from 219 managers who collectively had $630bn (£415.6bn) of assets under management.
