GLOBAL - The worldwide economic slowdown has impacted fund managers, forcing a revision and polarisation of asset allocations, according to a survey by Merrill Lynch.
The credit crunch has forced over half (53%) of managers to take overweight positions in cash, which Merrill Lynch said was a record. However, almost a quarter of investors (24%) said inflation would fall over the next 12 months.
A month ago, 32% of investors thought European Consumer Price Index inflation would rise, while 96% now thought the European economic outlook would deteriorate over the next year.
In terms of sector-specific views, a third of European investors said they were overweight in healthcare equities, up from none last month.
Karen Olney, chief European equities strategist, Merrill Lynch, explained: "What investors are looking for right now is immunity from the ills of the market place and the healthcare sector provides that.
"Healthcare companies might have their own industry risks, but they do offer immunity from the three horrors that are bugging investors: a rising oil price, the slowing economic cycle and the credit crisis."
Emerging markets have also been hit buy the slowdown. The number of managers overweight in emerging markets dropped from 31% in May to 4% this month.
Merrill Lynch said this was because investors were wary of the effects of inflation in these markets, the vulnerability to monetary tightening and slowing domestic demand.
A sizeable number (39%) of investors also expressed a preference for companies to use earnings to strengthen balance sheets rather than engage in share buybacks or distribute dividends.
Almost a third (32%) however said these measures should be a priority.
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