Europe
Sterling continues to struggle against the euro,
dropping 3.35%, while sentiment dipped 11
points to five. With so much political uncertainty
in the UK and the recovery still looking
feeble, its near-term prospects remain shaky.
Sentiment for European equity collapsed as
well, down from four to -8. As our Equities
article on pages 49-51 explains, UK investors
have tended to show little interest in Europe,
preferring instead to turn their interest to the
domestic market or further afield to emerging
markets. This could in part explain why managers
are reticent to put to much faith in the
sector’s prospects from a UK perspective.
That said, the FTSE World Europe ex UK
Index is not painting a particularly rosy picture
at the moment either. On a three-month outlook
it has lost ground – the only equity sector
to have done so – down 0.62%, while the
three-year figure is a paltry 1.83%.
Positive
Neutral
Negative
Positive
Neutral
Negative
The PA Manager Sentiment Survey is an overview of 26
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, Aviva
Investors, Axa Framlington, Barings, BlackRock, Credit Suisse, F&C,
Fidelity, Gartmore, Henderson Global, HSBC, Ignis, Invesco Perpetual,
Investec, JPMorgan, M&G, Martin Currie, Newton, Old Mutual, Schroders,
SWIP, GLG, Threadneedle (NB not all managers give a view in all sectors)
100
50
0
-50
-100
Apr ’09
100
50
0
-50
-100
Apr ’09
EUROPE EQUITY
STERLING PERFORMANCE vs EURO
32
16
0
-16
-32
Mar ’10
32
16
0
-16
-32
Mar ’10
FTSE World Eur ex UK (discrete) %
£ performance vs € %
Asia Pacific
Sterling may have lost a
hefty 7.38% against the
yen in the March survey
but managers have
determined that the UK
currency should be
facing a brighter future
in 12 months’ time – the
sentiment score jumped ten points to 26. But is
this sudden optimism warranted? One only has
to look back a year ago to April 2009 when
sentiment had jumped from -6 the previous
month to 41. Although it was only a temporary
spike – and for a currency an unusual one at
that – managers obviously thought that by now
sterling would have seen some improvement.
But the reality has been rather different, with
sterling still performing poorly against the yen.
The same can be asked of the latest rise in
Japan equity, which also moved into a positive
position. The country is becoming infamous for
having had so many ‘false dawns’ when it
comes to economic recovery that it is perhaps
Positive
Neutral
Negative
100
50
0
-50
-100
Apr ’09
STERLING PERFORMANCE vs YEN
MANAGER SENTIMENT SURVEY
difficult to believe that the managers’ positive
momentum can truly be maintained. The FTSE
All World Japan Index has shown a little more
promise in the past three months; at 11.72% it
is the second-best performing benchmark. But
on one-, three- and five-year views it is a very
different story, bringing in the poorest return
over one and five years.
Asia Pacific ex Japan equity has started to
lose some of its lustre, shedding a further four
points to drop back to 50, its weakest position
since June 2009. However, the FTSE World
Asia Pacific ex Japan was up a healthy 6.59%.
MAY 2010 [www.portfolio-adviser.com] PORTFOLIO ADVISER
US
-32
Mar ’10
£ performance vs ¥ %
US smaller companies proved to be the star
performer of the March survey. The benchmark
Russell 2000 Index turned in the strongest
return, rising 10%. It is the first time in 2010
that an index has added double-digit value; the
last time this happened was six months previously
in October 2009. In sentiment terms too,
the sector leaped 19 points to 24, its highest
score in well over five years and only two
points shy of a positive position.
With the recovery in the US economy slowly
gathering pace, banks are likely to again be
providing credit – the lifeline of many a small
business. Also, with the worst of the recession
now over, those which survived are likely to
have done so because of their strong fundamentals,
and so look more attractive from an
investment perspective. The coming months
will be interesting to watch to see whether managers
start to take serious notice of a sector that
generally holds little interest for UK investors.
There was more woe for the struggling
pound as it lost a further 5.28% against the
dollar – which is performing poorly itself
against other major currencies – while sentiment
fell a further five points to -16%.
32
16
0
-16
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Negative
100
50
0
-50
-100
Apr ’09
100
50
0
-50
-100
Apr ’09
100
50
0
-50
-100
Apr ’09
100
50
0
-50
-100
Apr ’09
100
50
0
-50
-100
Apr ’09
JAPAN EQUITY
ASIA PACIFIC EX JAPAN EQUITY
STERLING PERFORMANCE vs US DOLLAR
US EQUITY
US SMALLER COMPANIES EQUITY
32
16
0
-16
-32
Mar ’10
32
16
0
-16
-32
Mar ’10
32
16
0
-16
-32
Mar ’10
32
16
0
-16
-32
Mar ’10
32
16
0
-16
-32
Mar ’10
FTSE Japan (discrete) %
FTSE Wld AP ex Jap (discrete) %
£ performance vs $ %
S&P 500 (discrete) %
Russell 2000 (discrete) %
37
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