Yet the economic revival is not expected to be completely smooth. High levels of consumer and corporate debt are expected to dent the American recovery to some degree. Some 70% said it would hurt a little and 25% said a lot while 5% expected it to be unaffected.
Managers did see investment opportunities within global stockmarkets. Only 24% said the global stockmarkets were overvalued and then only slightly. Over 40% were comfortable with current valuations while the remainder said the stockmarkets were slightly or strongly undervalued.
Only 3% expected negative returns in global stockmarkets over the next year. Nearly 40% said they would rise by more than 10% while about half said between 5-10%.
Positive outlook
Generally the managers appeared to be taking an optimistic cyclical view. More fund groups were planning to launch new funds in the next 12 months while investing in shares was favoured above other asset classes. Half said share funds would dominate new fund launches while only 6% chose fixed income funds.
Managers displayed a preference towards growth companies over value ones. Some 43% said a growth investment style was likely to outperform while only 18% favoured a value one. Those surveyed were evenly split as to whether small or large companies would return the best performance over the next year. Over a third were neutral on the question.
Defensive sectors and regions fell out of favour in September’s survey. Some 41% of managers said the UK – a traditionally defensive market - would be the worst performer over the next year. In June – the last time the survey was conducted – only 14% ranked the UK bottom. Europe excluding the UK showed a slight worsening of sentiment with 25% voting it worst.
Asia excluding Japan topped the list with 42% saying it will be the best performing region. In a surprise move Japan followed in second place with 24%, over three times the level in June.
Niklas Tell, the editor in chief of Morningstar in Europe, said: “This shift raises the question of whether fund managers are responding to recent rises or really anticipating the future.”
Sector bets
In terms of sectors nearly half of the managers surveyed said utilities would offer the worst returns over the next 12 months. Consumer goods, which includes such products as cars, clothing, drinks, food and tobacco, came in second place with 17%.
Industrial materials was expected to be the top performer, followed by healthcare and telecommunications.
Most fund managers said the euro would be the best performing currency over the coming year though the proportion fell from 79% in June to 61% in September. The dollar was the least preferred currency by 60%.
Despite the scandal in America concerning illegal after hours trading in investment funds European fund groups were not overly concerned about investor confidence. When asked about the single most important theme for their industry over the next year most answered “economic recovery”.
Morningstar’s European offices conducted the survey from September 11th – 18th. Some 62 fund groups from 12 countries participated. On average they each managed €58 billion (£41 billion) and offered 80 retail funds.
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