Investor equity holdings hit 11-month high

LONDON Wed Feb 29, 2012 4:00pm GMT

LONDON (Reuters) - Investors boosted their equity holdings to a 11-month high in February while they slashed bonds and cash allocation as monetary easing from major central banks, especially from the euro zone, eased concerns about the sovereign debt crisis.

The surveys of 56 leading investment houses in the United States, continental Europe, Britain and Japan showed on Wednesday a typical balanced portfolio held 52.3 percent of its assets in equities, compared with 50.5 percent last month.

Specifically, allocation to euro zone stocks rose to 18 percent from 16.9 percent, driven mainly by U.S. investors.

Bond holdings, which include government and corporate debt, fell to 34.8 percent of the portfolio from 36.2 percent in January.

Cash dropped for a second consecutive month to 5.1 percent, its lowest since July, from January's 6.0 percent, showing investors are willing to put their money to work.

"Investors seeking value this year really must be in equities," said Lee Robertson, chief executive of Investment Quorum in London.

"Investors have a stark choice, to remain fearful of markets and see a marked depletion of capital due to inflation, or brave the markets for longer term capital growth."

In equities, North American weightings fell to 40.9 percent from 43.3 percent, while holdings in Japan hit their highest in at least a year of above 14 percent.

World stocks, measured by MSCI .MIWD00000PUS, are up nearly 12 percent since the start of the year, after a volatile 2011 that saw losses of more than 9 percent.

The European Central Bank injected another 530 billion euros (444 billion pounds) of cheap three-year money into banks on Wednesday, bringing the total amount of the special lending programme since December to more than 1 trillion euros.

Japan and Britain also expanded their unorthodox easing measures this year, while the Federal Reserve has promised to keep interest rates low until 2014 and act further when needed.

"In addition to expectations of QE3 by the Federal Reserve, the stock market is enjoying an increasing number of supporting factors such as the Bank of Japan's easing and China's reserve requirement ratio (cuts)," said Kenichi Kubo, senior fund manager at Tokio Marine Asset Management in Tokyo.

In their fixed income portfolios, respondents increased exposure to government debt slightly to 53.9 percent while they boosted allocation to high yield bonds to 12.7 percent.

REGIONALLY

U.S. money managers increased their equity holdings in February to the second highest level in 14 months, tracking a rally in the S&P 500 .SPX.

Firms allocated 65.6 percent of their assets into equities - a figure only exceeded by December's 66.8 percent figure over a 14-month period.

The advance in shares has come at the expense of bonds, whose allocation decreased to 28.3 percent from 30.6 percent in January.

Also notable is the exposure to equities in the euro zone, which increased to 14.5 percent in February, the highest since December 2010, from 10.7 percent in January.

Monetary easing around the globe whet the appetite for risk of Japanese fund managers, who boosted their average global stock weighting to 44.9 percent from 43.2 percent in January. Their bond weighting dropped to 48.6 percent from a record high of 50.2 percent hit the previous month.

British investors allocated more money to stocks at the expense of safe havens like cash and bonds. The average exposure to equities in balanced portfolios jumped more than two percentage points to 52.1 percent, the highest since July.

The increase came at the expense of investment in bonds, down to 23.8 percent from 25.2 percent while money kept in cash for safety dropped to 6.6 percent from 8.9 percent.

Reuters also issued two similar polls from Italy and China, neither of which was included in the global calculations.

Italy-based fund managers left their holdings broadly stable in February with expectations of a flood of more central bank cash offset by doubts about Greece's ability to implement a new rescue deal and by lingering worries over economic growth.

Equity and bond exposure were trimmed to 42.4 percent and 43.5 percent from 43 percent and 44 percent respectively in a global balanced portfolio.

Chinese fund managers raised their suggested equity weightings to a three-month high of 83.3 percent on expectations that the government will continue to ease monetary policy.

They reduced the average recommended bond weighting over the next three months to 8.9 percent from 10.1 percent a month earlier, but raised the suggested cash allocation to 7.9 percent from 6.9 percent.

(Additional reporting by Hideyuki Sano in Tokyo, Chris Vellacott and Philip Baillie in London, Samuel Shen and Jason Subler in Shanghai, Maria Pia Quaglia in Milan, and Bangalore Polling Unit; Editing by Catherine Evans)

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