Huge increase in equity managers worried about valuations

The number of fund managers worried about equity valuations has risen significantly, according to a new survey from Aviva Investors.

The Aviva Investors Multi-Manager Equities Survey found that 31 per cent of managers rated equity valuations as the biggest risk facing the asset class in 2014, a huge jump from the figure of 9 per cent recorded in last year’s survey.

The increased focus on valuations has coincided with a substantial reduction in the number of respondents most concerned by market uncertainty and macroeconomic issues, which dropped to 35 per cent from 61 per cent last year.

Article continues after advert

The survey, undertaken annually by Aviva Investors’ multi-manager team, asked equity fund managers based throughout the world managing roughly £3trn of assets for their views on the markets.

In spite of the huge rally seen in mid cap companies in recent years, especially in the developed world, mid caps were the area most favoured by equity managers in 2014.

41 per cent of respondents said this area of the market would produce the best returns this year, while 35 per cent chose large caps.

Ian Aylward, head of multi-manager research at Aviva Investors, said: “I am particularly interested to see that respondents still expect mid caps to outperform despite the strong run they have enjoyed over recent years.

“This tallies with the positioning of the majority of the external managers that we use in our products - with managers citing to us their expected superior growth prospects despite elevated valuations.”