Survey Reveals Which Countries are Gaining and Losing Mutual Fund Allocations

Posted by Patrick O'Connor on 6/19/08 1:16 pm

A recent Merrill Lynch survey of 204 fund managers from around the world exposed which countries are gaining mutual fund assets and which ones are losing them.  The big surprises were that many emerging powers in Asia were the big losers, the U.S. had received its biggest allocation since 2001, and a record number are now underweight European equities.

Fund managers reduced their net weightings in China to -58% in June from -14% in May, and India fell to -63%.

The general theme of the survey showed that managers are pulling assets from countries that need to import commodities (oil, food, metals, etc.), and diverting the money toward countries that are exporting commodities.

That’s why Russia and Brazil are still gaining inflows.  In fact, Russia’s inflows accelerated in June from May.

Fund managers are increasing allocations (net +23%) in the U.S., mostly for safety precautions, and reducing them in Europe, due to profit concerns.

“The [U.S.] Fed has eased dramatically, but the ECB hasn’t eased at all.  It intends to tighten regardless of the consequences on growth.  This is what is eating away at confidence in Europe,” said David Bowers, the organizer of the survey.

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