U.S. managers hold stocks amid May’s market rout

By Jennifer Ablan

NEW YORK (BestGrowthStock) – U.S. fund managers kept their high exposure to equities in May, decreased bond allocations but put more in cash on fears the euro zone debt troubles could spread and dampen the world recovery, a Reuters poll showed.

Based on 11 U.S.-based management firms surveyed May 18-26, the poll found they held an average of 65.2 percent of assets in equities, unchanged compared with April. On a like-for-like basis this decreased from 66.7 percent a month earlier.

The most notable shift, however, was in fixed-income and cash allocations. The poll showed managers reducing bond holdings to an average of 28.8 percent in May, from 29.5 in April. On a like-for-like basis, they rose from 27.9 percent.

They added to their cash, up to 2 percent, from 1.7 in April and 1.5 measured like-for-like.

For much of May, investors have been focused on the potential contagion from the spiraling deficits in Greece and other parts of the euro zone.

Money managers were still unwinding “risk trades” even as the European Union and the International Monetary Fund announced a nearly $1 trillion bailout for ailing member states.

“I do think what’s happening will result in slower growth in Europe,” said Steven Bleiberg, head of global asset allocation at Legg Mason Inc.

While other fund managers scaled back on U.S. equities, Bleiberg said Legg Mason stuck to its overweight because “the U.S. was looking better than the rest of the world.”

The Dow Jones Industrial Average (.DJI: ) is down more than 9 percent in May alone, while the Standard & Poor’s 500 index (.SPX: ) is down more at 10 percent.

David Joy, chief market strategist at RiverSource Investments, a subsidiary of Ameriprise Financial Inc, shared Bleiberg’s sentiment. “Our preference for the U.S. among the world’s developed markets is in some respects enhanced, on a relative basis, by the events in Greece and elsewhere.”

Another preference that money managers had in May: Alternative assets including gold and gold securities.

Money managers held an average of 2.6 percent of such assets in May, up from 2.4 percent in April but down a touch on a like-for-like basis which was 2.7 percent.

“The outlook for gold is very, very strong,” Evy Hambro, co-chief investment officer of BlackRock’s natural resources equity team.

“Gold is certainly nowhere near as volatile as the moves we’ve seen in currencies,” Hambro added. “Look at the euro!”

Stock Market News

(Polling by Bangalore Polling Unit; Editing by Gary Hill and Toby Chopra)

U.S. managers hold stocks amid May’s market rout