Doomster Fund Managers Shift Into Bonds

Increasing concern that the global economy is weakening has prompted more fund managers to shift assets into bonds, according to a survey of managers taken in early August.

The number of fund managers saying they believe global bond markets are overvalued fell to a net 22%, from 35% a month ago and 48% in May, found the survey of 209 fund managers that run funds with assets of $637 billion. The survey was conducted by Merrill Lynch & Co.

Around 46% of the managers surveyed said they hold fewer bonds than a broader market index, as compared with 65% in June. Also, 20% of the managers now own more stocks, compared with 34% last month, while 33% hold more cash, up from 31% last month, which the survey said represents an all-time high.

The survey of 209 managers polled between Aug. 4 and Aug. 10 said that the move toward favoring bonds came amid pessimism on global growth, concern about corporate earnings strength and because the Federal Reserve kept interest rates on hold in August.

Around 70% of survey participants said that they believe that the global economy will deteriorate in the next 12 months, compared with 60% who took this view in July.

"The big call this autumn is shaping up to be: Will this liquidity be directed back into equities, or could it head for the bond market instead?" said David Bowers, an independent consultant to Merrill Lynch on the monthly fund-manager surveys.

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