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Citywire AAA-rated fund manager survey: seven themes for 2013

Our exclusive survey highlights the key themes running through the investment thinking of Europe's top fund managers.  

What makes the top tier tick?

Every quarter we canvass the most highly-decorated fund managers with a series of questions to get a better handle on what the leading investors think about macroeconomic pressures, domestic dramas and portfolio positioning. Here we present a snapshot of the seven stand-out issues from the first survey of 2013.

Note:The Citywire AAA manager survey canvassed all fund managers to have received a AAA rating as of the January 2013 ratings analysis.

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Beware the bubble burst

In a low growth world many investors have turned their attentions to finding higher yielding assets. But this is not without its risks. Over half of respondents offered a word of caution when it came to the much-discussed ‘hunt for yield’ with 51% warning it was creating dangerous asset price bubbles.

Almost as scathing was the view of 27% respondents, who said the yield-chasing mentality was distracting investors from more important issues. Meanwhile, the remaining 22% said it was the only option given the current climate.

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Be mindful of the Middle East

When it comes to negative surprises on the cards for the first half of 2013, the threat of military, political and social instability in the Middle East emerged as a strong theme among investors. This view of Middle East tensions as a major obstacle to overcome ties in with the concerns voiced about oil price shocks...

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Oil shock could cause major slip up

Even those not operating commodity-centric strategies are wary of the fallout from an oil price shock in the coming year. It is not a leap of faith to suggest there is a strong link between concerns over the Middle East and a sudden spike in oil.

While 46% of investors said a commodity price spike would not hurt their approach, 51% said they are keeping one worried eye on what the oil price does. Meanwhile, 3% pointed to a sudden move in the gold price as the real problem to behold.

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Nobody’s holding cash

Investors are embracing riskier assets again and the top tier of talent is not shying away from putting capital to work. A whopping 78% of respondents admit to holding less than 5% cash at this time. At the other end of the spectrum, however, 5% said they have over one-fifth of their portfolio currently on the sidelines.

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China will overcome

Dogged by doubt over its growth performance in 2012, the AAA-rated managers have refused to give up hope on the emerging market powerhouse. This saw 40% of those polled back China to avoid a slowdown. This is while 32% stand behind the US to make good on its debt ceiling dealings and show signs of recovery.

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Eurozone: set phasers to numb

‘Super’ Mario Draghi earned himself many admirers in 2012 for his efforts to ‘do whatever it takes’ when it came to keeping the eurozone as one cohesive unit. From the LTRO to the OMT aid schemes, the European Central Bank head's acronym-busting efforts have not gone unnoticed by investors.

This confidence does not, however, translate into longer-term confidence. In total, 67% of AAA-rated managers are basing their 2013 outlook on a muddle through scenario, while only 18% think policymakers have it covered.

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Banking on banks

There was a clear winner when it came to AAA-rated fund managers picking the one sector they expect strong performance from over the next quarter. Financials bagged 44% of the vote, way ahead of industrials, which was chosen by 25% of respondents.

Further down the list, there was a modicum of support for energy (11%) and healthcare (6%), with some, albeit minor, suggestion of optimism for telecoms, consumer staples, utilities, materials and consumer discretionary.

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