EquitiesAug 11 2015

Advisers’ confidence in equities rises sharply

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Advisers’ confidence in equities rises sharply

Advisers’ preference for equities over fixed income has increased sharply since the start of the year, according to the Barings Investment Barometer.

The survey by Baring Asset Management interviewed 108 investment professionals about the second quarter. Some 95 per cent of respondents said they were “very” or “quite” favourable towards global equities. In the previous quarter, the figure was 75 per cent.

Meanwhile, net retail flows into equity funds tipped up slightly in June to £874m from £802m in May, according to the Investment Association.

The Barings’ survey found advisers were much more favourable to Europe in the second quarter. Overall favourability for the region jumped from 53 per cent to 78 per cent.

Advisers were also more optimistic about UK equities, with 91 per cent saying they were either “very” or “quite” favourable, up from 79 per cent  in the previous quarter.

Rod Aldridge, head of Europe, Middle East and Africa wholesale distribution at Barings, said: “It is interesting to see how confident intermediaries are at the moment towards equities as an asset class. The contrast with traditionally ‘safer’ investments such as cash, gold and fixed income is quite distinct.”

Indeed, advisers’ attitudes towards fixed income and cash are increasingly negative. More than half of the respondents said they are recommending their clients reduce their exposure to fixed income. Overall favourability towards fixed income assets was just 26 per cent in the second quarter, while the preference for cash was 4 per cent.

In May and June, fixed income funds suffered net retail outflows, with £198m of outflows in June, according to the Investment Association.

In spite of reduced concerns about the eurozone’s growth prospects, the region remains advisers’ choice for the biggest macro challenge to investment growth over the next six months. The survey showed 69 per cent of advisers thought it was one of the biggest challenges, down from 78 per cent in the first quarter.

At the same time, concerns regarding the inability of over-leveraged economies to reduce debts has increased.

Findings showed 55 per cent of advisers thought this was one of the biggest threats, up from 46 per cent. Other concerns included political uncertainty in Russia and slowing growth in China.

Mr Aldridge added: “Clearly the view [is] that headwinds such as uncertainty in Europe over Greece and geopolitical risks are not viewed as significant enough to overcome wider, more positive developments in the global economy.”