UK Fund Managers Expect Market Recovery in 12 Months

by Carla Johnson, Investorsoffshore.com, London

16 August 2001

The latest survey of UK fund managers from Merrill Lynch shows that almost half of them (46%) believe growth investing will be more successful than 'value' investing over the next 12 months. That's a change from past surveys, which have been favouring value strategies for the last eighteen months.

Value investing, which involves buying shares below net asset value, has been extremely successful since the dotcom shakeout began, and is still favoured by 39% of managers. Phillips & Drew, for instance, achieved its place in the top decile of managers by using value strategies. Growth investing involves buying shares in companies with high rate of returns in earnings per share.

The survey finds that managers are bullish about a recovery in the market, with 63% of fund managers now favouring cyclical stocks over the defensive sectors. Just over half of respondents (52%) are overweight in equities, while 41% are underweight in bonds. A majority of respondents expect this balance to continue or become more marked over the next 12 months.

The regional bias is towards US equities, where 47% of fund managers are overweight compared to 34% being underweight in eurozone equities. Managers are in general slightly underweight in Japanese and emerging markets equities. The majority of respondents have no plans to increase eurozone equity holdings, and more managers plan to decrease UK equities than to buy them.

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