WM Quarterly Outlook: how leading investors are positioned for 2013

No further to fall

Searching for positives, sentiment at least doesn’t seem to have any further to fall.

‘In 2013, we expect global growth and corporate profits to be benign, and sentiment to improve,’ said Denley. ‘However, this doesn’t necessarily imply steady stock markets and positive returns. Winter is the season for annual forecasting, but don’t believe anyone who suggests they can predict where the market will be at the end of 2013.

‘Our investment strategy focuses on value, and hence we are weighted accordingly. For example, there is significantly more value to be found in Europe than in the US, or more accurately there is more value investing in quality multinationals based in Europe versus quality multinationals based in the US.

‘In addition, there is very little, if any, value to be found in the sovereign debt of the stronger economies in the developed world, hence we own very little. Over the course of 2013, if we encounter significant volatility in equity or other markets, we are likely to adjust our allocation opportunistically, always focusing on value.’

Elsewhere on the asset allocation figures, investors appeared to recognise the end of yield compression within fixed income, with managers overweight developed world corporate debt booking a large fall, from 37% to 13.3%.

After bumping along in single digits for the first nine months of the year, the percentage of respondents reporting an overweight in developed world sovereign debt fell to zero. After briefly breaking into double digits in Q3, the number of managers overweight property slid back to 3.4%, the lowest figure since the end of 2011.

Within equity, the nearest thing to a positive consensus was in emerging markets, which managers seemed to have concluded have reached a point where its value, after several years of sideways movement, has to be recognised by the market.

Exactly half of respondents reported an overweight in the sector, versus a third neutral and 16.7% underweight.

Just over half of investors (53%) were neutrally positioned in UK equity, versus 36.7% overweight (down from 44.4% previously) and 10% neutral, also marginally down, from 14.8% in Q3.