Managers’ faith in TMT is also suffering while the financial services stockmarket sector has grabbed their attention. It is currently the most favoured to perform best over the next 12 months, at the expense of TMT.
Some 39% of those surveyed in May ranked financial services top, up from 28% in April and 24% in March. Over the same three months the proportion of ma
nagers who placed TMT first fell from 44% in March to 36% in April to its current position of 22%.
On average TMT has underperformed against broader categories such as UK Large Cap Equity and Euro-Zone Large Cap Equity.
| TMT performance | ||
| Morningstar category | Average one year performance |
Average three year performance |
| TMT | -39.70% | -43.10% |
| UK Equity Large Cap | -11.00% | -7.10% |
| Euro-Zone Large Cap Equity | -13.10% | 7.20% |
A slightly negative shift in sentiment on returns on global shares over the next 12 months developed this month. Fewer firms expected returns of 10-15% while the proportion which expected either negative returns or those in the 0-5% range marginally increased.
Yet the overwhelming majority of fund management firms were upbeat on the overall performance of the global stockmarkets. Some 90% said they expected performance to at least beat the 5% mark while 32% anticipated returns in the range of 10-15% over the next year.
Clear favourite
A continuing trend shows the popularity of the euro rising among European managers while the appeal of the dollar is falling fast. Some 82%, compared with 72% last month, said the euro will be the best performing currency over the next year. This increase was at the expense of the dollar. While still the second most favoured currency its position fell from 24% to 10% this month.
Not only did more managers believe the dollar is less likely to be the best but a greater amount also predicted it would be the poorest performer. Its ranking in the worst currency over 12 months question shot up, with 41% of managers knocking it, compared with 14% in April.
That was just 2% behind the yen, which although taking the top spot for worst performing currency with 43% improved from its position of 66% in the April survey.
The euro has come into vogue more as a result of the dollar’s poor showing than of its own superiority. Foreign money has a big impact on American markets yet overseas investors are increasingly reluctant to continue investing.
Several factors are discouraging foreign investment including the fallout of the Enron collapse and the calls for increased scrutiny of corporate accounts and the accountancy firms hired to audit the books. Concern about the reliability of investment bank research and the belief that many American shares are too expensive have simply added to the confusion.
Many foreign investors are adopting a wait-and-see approach. The euro received attention and investment from foreign investors by default, as the next best thing.
Strongest markets
Asia excluding Japan was by far the most likely to offer the strongest performance over the next year according to the management firms. Some 55% backed it as the top region, compared with 50% last month and 43% in March.
Europe excluding UK remained the second choice for best performing market but it fell to 20% from 34% last month. Once again the big loser this month was the US as 30% ranked it worst performer, up sharply from 8% in April.
Morningstar’s European offices conducted this survey between May 14th–24th 2002. The participants, 63 fund management groups from 10 countries, on average manage €58 billion (£37 billion) and offer 93 retail funds.
