LONDON (Reuters) - European fund managers took cash and put it into shares and bonds this month, viewing that major central bank banks will retain loose monetary policy for some time, a Reuters survey showed.
Fund managers in the poll, released on Friday, slashed cash levels to their lowest in 10 months in May and lifted equity holdings to their highest since January. They also increased their bond positions from April.
Market volatility has eased as investors have seen more clarity in monetary policy of the world’s major central banks, with the European Central Bank widely expected to cut interest rates next week as it seeks to stave off the risk of deflation.
“While there is considerable deflation risk in Europe, we believe that the ECB will help with new measures to increase liquidity,” said Sandra Crowl, a member of the investment committee at Carmignac.
U.S. interest rates are also expected to stay low for longer, following mixed economic data recently.
The survey polled 19 asset managers in continental Europe from May 12 to 28, at a time when U.S. stocks reached record highs and risky corporate debt and emerging stocks also rallied.
Equity weightings rose to a five-month high of 48.1 percent, above the long-term average of around 46 percent, while cash levels dropped to 7.9 percent from 9.5 percent in April.
Overall bond holdings within the model portfolio rose to 37.5 percent, from 36.7 percent in the previous month.
The respondents cut North American equity holdings to 37.4 percent from 39 percent, putting more money into Britain among other markets.
Holdings of emerging market bonds - in Eastern and Central Europe, Asia and Latin America - rose. Emerging European bond holdings climbed to their highest in 10 months at 1.8 percent, with investors comparing yields favorably to euro zone debt.
North American bond holdings rose to 22.6 percent, their highest since October, but euro zone debt holdings fell to their lowest since January, at 60.2 percent.
Investors remained overweight in riskier corporate bonds, while they disliked lower-yielding developed market bonds in the United States, the euro zone and Japan.
Editing by Susan Fenton