The PA Manager Sentiment Survey is an overview of 25
of the biggest fund managers operating in the UK. Every
month, Skandia asks the managers what their forward
12-month outlook is on a series of asset classes and
sectors – they can answer positive, negative or neutral.
We consolidate all this information into a bespoke
database that shows how fund industry opinion changes
month by month – and we compare that to the monthly
discrete performance of the relevant index.
The bar charts show our sentiment number ranging
from +100 (all managers are bullish), through 0
(bulls and bears balance each other out) to -100 (all
managers are bearish). A score closer to zero generally
indicates a lack of willingness for managers to make
strong predictions. If the sentiment is -25 or lower,
then we count it as ‘bear’ and mark it red; if it is 25 or
higher then it counts as ‘bull’ and is coloured green. In
between, it is neutral and orange.
MAnAgErS POllEd: Aberdeen, Aegon, Allianz global Investors, Axa
Framlington, Barings, Blackrock Merrill lynch, Credit Suisse, F&C, Fidelity,
gartmore, Henderson, HSBC, Invesco Perpetual, Investec, JPMorgan,
M&g, Martin Currie, Morley, newton, Old Mutual, resolution, Schroders,
SWIP, Sg Asset Management, Threadneedle (nB not all managers give a
view in all sectors)
European equities have swooped in and out of
favour over the last year. In October last year,
it was one of our fund managers’ favourite
areas to invest, showing a sentiment score of
50 in November 2007.
Then, as the index started to crack and the
full scope of the global breakdown became
apparent, sentiment started to lower. Since we
started these surveys more than three years
ago, European equities have always been positively
regarded. That is, until April this year,
when then slipped into the negative – reaching
a low point in August. Since then, it has crept
back up, reflecting an attitude to all equity
investing across the globe.
Meanwhile, sterling has seen a crushing
decline against pretty much all currencies,
including the euro. And as long as the Bank of
England continues cutting interest rates faster
than the ECB, it will presumably continue.
Positive
Neutral
Negative
Positive
Neutral
Negative
100
50
-50
100
50
-50
0
-100
Nov ’07
0
-100
Nov ’07
Europe
EUROPE EQUITY
STERLING PERFORMANCE vs EURO
-20
Oct ’08
-20
Oct ’08
20
10
0
-10
20
10
0
-10
FTSE World Eur ex UK (discrete) %
£ performance vs € %
DEcEmbER 2008 [www.portfolio-adviser.com] PORTFOLIO ADVISER
Asia Pacific
Until just a month ago,
Asia was touted at the
global fund industry’s
saviour, unaffected by
the global downturn
because of its strong
country balance sheets,
high level of domestic and regional consumer
demand and the relative cleanliness of its
banks in terms of leverage and toxic debt.
Hooray for investors – a safe haven.
Japan was in a similar position. During the
‘lost decade’, the banks trained themselves to
take very low levels of risk and this has helped
keep them solvent now.
But stock market participants do not seem
to care for these niceties. International fund
flows into risk-free assets have hit everyone, as
they do in every downturn, so as the indices
sharply fell in October you can see that the
sentiment went with it.
Having said that, the sentiment for both Asia
Positive
Neutral
Negative
100
50
-50
0
-100
Nov ’07
STERLING PERFORMANCE vs YEN
The strengthening of the dollar has been astonishing.
Considering US interest rates are almost
as low as they can be (1%), while UK rates are
3%, the fall is transparently not related to
underlying value.
On 1 Aug, £1 would have bought you $2; on
1 Sept, it would have been worth $1.80; in mid-
November, it was down to $1.50. Because of
the time lag collecting these stats they only run
until the start of October, but still it is noticeable
that the consensus is starting to revert to
neutral for sterling – presumably on the basis
that it cannot get much worse.
Meanwhile, equities are more interesting.
The US economy got worse more quickly,
had more serious problems and cut its rates
earlier and deeper than anyone else. As a
result, the view has been strengthening for
several months that US equities will be up in a
year’s time.
Sentiment on small companies has likewise
improved but still only to neutral. This is surprising,
considering small caps traditionally
lead in recoveries. That may be more to do
with an unwillingness of managers to take a
strong view in such volatile times.
US
ManageMent sentiMent survey
-20
Oct ’08
20
10
0
-10
£ performance vs ¥ %
Positive
Neutral
Negative
Positive
Neutral
Negative
100
50
-50
0
-100
Nov ’07
100
50
-50
0
-100
Nov ’07
JAPAN EQUITY
ASIA PACIFIC EX JAPAN EQUITY
and Japan is still in positive territory, but
only just.
Looking under the bonnet is revealing:
for the past year, two-thirds of our fund managers
have been consistently neutral on Japan
– only a small number push the sentiment up
and down.
Asia Pacific ex Japan had almost no neutrals
until a month ago, when half the positives
switched into it. Just four fund managers
believe that Japanese equities will be down in
12 months; a different four believe the same
about Asia ex Japan.
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
100
50
-50
-100
Nov ’07
100
0
50
-50
100
-50
0
-100
Nov ’07
50
0
-100
Nov ’07
STERLING PERFORMANCE vs US DOLLAR
US EQUITY
US SMALLER COMPANIES EQUITY
-20
Oct ’08
-20
Oct ’08
-20
Oct ’08
-20
Oct ’08
-20
Oct ’08
20
10
0
-10
20
10
0
-10
20
10
0
-10
20
10
0
-10
20
10
0
-10
Russell 2000 (discrete) %
Russell 2000 (discrete) %
£ performance vs $ %
S&P 500 (discrete) %
Russell 2000 (discrete) %
31
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.