Funds managers are bullish on the broad markets, if not their own businesses, with a big rise in sentiment towards Australian equities, Australian bonds and the Aussie dollar, according to a survey by Russell Investments.
The survey, of 41 Australian funds managers, showed that 54 per cent expressed a preference for Australian equities, compared with 27 per cent in the same period last year, while 49 per cent expressed a preference for international equities, compared with 30 per cent last year.
Perhaps more interestingly, given recent super fund reticence to invest new money in growth assets, the preference for Australian cash as an asset class, has declined to 13 per cent, against 52 per cent last year.
The percentage of managers who thought the Australian share market was undervalued jumped to 56 per cent, compared with 16 per cent in the second quarter of 2008 and a mere 11 per cent in the December quarter of 2007. Only 12 per cent consider the market to be overvalued.
This compares with a similar survey of US-based managers published in November which showed that 70 per cent thought that US equities were undervalued. Nearly one-third of these had already called the US market as ‘undervalued’ prior to the sell-off in September and October.
Russell in Australia says that one of the largest shifts in sentiment related to the Australian dollar. Bullish views jumped from 9 per cent last quarter (September) to 45 per cent this quarter – the highest level of bullishness about the Aussie dollar since the survey’s inception in 2004. Last quarter, 65 per cent of Australian managers were bearish on the Aussie dollar, compared with 26 per cent this quarter.
According to Andrew Pease, investment strategist at Russell, the survey results showed that managers now thought it was time to start considering "new value opportunities".
"Overall, Australian investment managers are preparing to move out of the safety of cash and look to be cautiously adding risk to their portfolios as we head into what will hopefully be a recovery in 2009," he said.
The most optimistic predictions related to: international equities (60 per cent bullish), Australian broad market equities (57 per cent), Australian small caps (57 per cent), Austra;lian bonds (50 per cent) and Australian listed property (31 per cent).