Two-thirds of global equities fund managers are overweight Europe ex UK relative to global indices, despite fears of recession, unemployment, government defaults and a potential eurozone break up.
Most of the 106 funds surveyed by S&P Capital IQ held European domiciled large-caps with notable emerging markets exposure such as Nestlé and Unilever, rather than domestically exposed shares, continuing a trend from 2011. The review period was from the end of June 2011 to the end of June 2012.
"The rationale remained that in developed markets better corporate governance prevailed, large-caps were still cheap relative to small-caps and a holding with multinational emerging markets exposure is preferable to direct investment in a specific country where companies might be looking overvalued," said Susan Sworn, fund analyst at S&P Capital IQ.
As reported in our fund tip last week (read it here) a number of investment professionals are turning to Europe because the shares are good value and many world class companies are listed on continental markets.
However, few funds were overweight the US, which S&P said is unsurprising given its weight in global indices - 48 per cent of the MSCI AC World Index and 60 per cent of MSCI World. This is in contrast to the position of many investment professionals at the start of the year who thought that the US was one of the better developed markets options, for reasons including better gross domestic product (GDP) numbers (read more on this).
Only seven funds surveyed by S&P had more than 55 per cent in the US, but the regions averaged 40 per cent exposure, reflecting the fact that some of the world's largest information technology (IT) names are domiciled in the US. The performance of the IT sector helped the S&P 500 to achieve a small positive return over the 12 months to the end of June 2012, a feat few countries were able to emulate.
IT, along with consumer staples and consumer discretionary, was one of three sectors which were overweight in global portfolios.
For the global equities funds we favour, see the IC Top 100 Funds
Sector performances of MSCI World, 30 June 2011 to 30 June 2012
| Sector | Performance (%) |
| IT | 5.5 |
| Consumer services | 5.5 |
| Real estate | -1 |
| Consumer discretionary | -3 |
| Utilities | -7.9 |
| Energy | -13.5 |
| Banks | -17.6 |
| Basic materials | -23.8 |
Source: Bloomberg/S&P Capital IQ
