Individuals raise equity holdings, cut back on government debt

Within bond portfolios, however, concern about the cost of US Treasuries and the stability of euro zone debt, did not show up dramatically. Allocations to emerging market debt were cut instead. Surveys of 55 leading investment houses in the US, Europe, UK, Japan and Britain showed investors holding 54.1 per cent of a typical mixed-asset portfolio in stocks in December. That was up from 53.2 per cent in November and the highest since 55.4 per cent in February. Bonds were cut to 33.9 per cent, the lowest since February, from 34.2 per cent in November. Cash was at 3.9 per cent, down from 4.6 per cent.

A combination of improving economic data and a belief in future, robust, corporate earnings have lifted investor appetite for equities over the past few months.

The MSCI all-country world stock index was flirting with levels last seen in September 2008 on Wednesday.

"People are coming off the sidelines and buying stocks," said Keith Wirtz, president and chief investment officer at Fifth Third Asset Management in Cincinnati. There was also sign of risk appetite in an increased exposure to riskier, higher yield bonds.

At the same time concerns have risen that yields on benchmarked government bonds are too low, providing little return and threatening a sell-off.

vestors in the In P Reuters polls did cut back overall exposure to bonds. But when it came to the money left for bonds they favoured US and euro zone government debt over most emerging markets, which have been very popular this year.

Exposure to emerging market debt was 8.1 per cent of a bond portfolio for the month, compared with 9.6 per cent a month earlier.

Investors also regained some composure about euro zone government bonds following the crisis over Ireland's debt. They raised ex posure within a bond portfolio to 31.5 per cent from 31.2 per cent, although these numbers remain well below the more than 42 per cent seen at the beginning of 2010. US fund managers built up their equity holdings in December to one of the highest points this year on signs of a swifter economic recovery.

The poll, which surveyed 13 US-based fund management firms, showed firms boosting their equity allocations for the fourth month in a row to an average of 65.0 per cent, two percentage points over November.

The poll also showed money managers scaling back their exposure to bonds for a fourth consecutive month, to 27.9 per cent of their portfolios in December, compared with 30.2 per cent last month.

Japanese fund managers held on to most of their global stock weighting in the month and raised their bond allocation to the highest level since September on the view that recent falls in bond prices were overdone. The 13 respondents also lowered their cash position.
Source :- My Digitalfc