Investors cautious but don’t desert Japan: Reuters

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) – Investors are putting their faith in Japan’s ability to recover from its major disasters, barely changing their equity exposure to the stricken country despite earthquake, tsunami and nuclear breakdown.

Reuters asset allocation surveys of 54 leading investment houses in the United States, Europe excluding the UK, Britain and Japan showed a general step back from riskier assets during a month dominated by the disasters, turmoil in the Arab world, prospects of higher interest rates and a rising oil price.

But average allocations across the four regions to Japanese equities only fell to 12.6 percent from 12.7 percent.

Furthermore, most of this fall was due to European investors. U.S. and UK investors actually raised their allocations, while Japanese investors themselves only cut back a small amount.

“The market was relatively stable despite many uncertainties,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management. “There are expectations that investment conditions will improve potentially.”

Across the world, however, investors generally appeared to be betting on continued volatility, particularly given the worry that turmoil in North Africa and the Middle East will keep the price of oil high, threatening global economic recovery.

The 54 companies held an average of 52.6 percent of their assets in equities, down from 53.6 percent in February, and also cut bonds a bit, to 34.0 percent from 34.2 percent.

Cash holdings rose to 4.7 percent from 4.6 percent. Among the biggest gainers were alternatives, which include commodities, up to 6.7 percent from 5.8 percent.

Exposure to other riskier assets such as corporate debt also fell.

“If tensions do indeed continue to mount then the oil price could rally further, which would likely have dramatic knock-on effects for the global economic recovery and the equity risk premium,” said Alec Letchfield, chief investment officer, UK Wealth, at HSBC Global Asset Management’s private client arm.

“In the current environment it is best to be in capital preservation mode.”


U.S. fund managers bumped up their exposure to equities and cut their allocation in bonds.

Based on 14 U.S.-based fund management firms surveyed, the poll found an average of 64.9 percent of assets in equities, compared with 64 percent a month earlier.

Bond exposure decreased to 27 percent in March from 28 percent the previous month and 28.6 percent in January. Cash slipped to 2.5 percent from 2.7 percent.

European investors added to cash and favored local equities.

The Reuters poll of 17 leading fund management companies based in non-UK Europe trimmed equity and bond holdings in favor of cash.

Overall, a typical balanced portfolio held 48.3 percent of its money in equities, down from 48.6 in February, 37.3 percent in bonds, down from 38.5 percent, and 6.9 percent in cash, up from 6.1 percent.

Japanese fund managers reduced their global stock weighting to a 12-year low and raised their bond weighting to an all-time high as they lightened risk positions after the March 11 earthquake.

The average weighting for global equities among firms fell 3.4 percentage points from the previous month to 42.6 percent — the lowest since January 1999.

The weighting for bonds climbed to the highest since the survey was first compiled in February 1995. It jumped to 49.5 percent in March from 47.6 percent a month earlier. Cash was at 5.1 percent versus 4.2 percent in February. [JP/ASSET>

British fund managers eased back allocations to stocks and lifted exposure to alternative assets such as commodities as the geopolitical climate made some rethink their appetite for risk.

The monthly poll of 11 managers showed exposure to equities in balanced portfolios falling to 54.7 percent from 55.6 a month earlier.

Bonds fell to 22.2 percent from 22.8 percent and cash fell, to 4.4 percent from 5.4. Alternatives were the beneficiaries, now accounting for 16 percent of portfolios, up from 14.1 percent a month earlier.

(Additional reporting by Akiko Takeda, Chikafume Hodo, Caroline Copley, Jennifer Ablan, Chris Vellacott and Bangalore Polling Unit; Graphic by Scott Barber; Editing by Catherine Evans)

Investors cautious but don’t desert Japan: Reuters