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Smart Beta: wealth managers recover appetite for EM risk

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by David Campbell on May 08, 2014 at 07:20

Wealth managers moved heavily back into emerging market (EM) equities in the first quarter in one of the biggest single quarter-on-quarter moves in the three-year history of the Wealth Manager’s allocation survey.

Analysis of the data followed BlackRock numbers showing EM ETF redemptions slowed from $4.7 billion in February to $1.8 billion in March, turning positive in the second half of the month.

 

While net EM exposure – calculated by subtracting the number of respondents either neutral or underweight from those reporting an overweight – remained below zero, the move was significant.

The move from -55.5% to -14.3% net overweight was the third largest quarterly move in the history of the survey, following the bull capitulations within Japanese and European equities that occurred in Q3 last year (see chart).

European equity remains by the far the single biggest positive conviction call for UK wealth managers within the last three years with a 42% net overweight at the beginning of Q2.

‘Micro cap UK/Europe, and EM equity should be the big surprises,’ of 2014, said Alan Steel, founder and director of Alan Steel Asset Management.

Alastair George, founder and director of Hasley, was more measured, saying he expected emerging market equities to record ‘acceptable but not extraordinary progress’.

Overall, readers remained modestly risk-on, reporting equity risk exposure of 6.21, on a scale of one to 10 where 10 is the greatest. 

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