In terms of sector performance, fund managers favoured telecommunications and industrial materials shares over the next 12 months. Utilities remained the worst expected performer, although sentiment improved to 32% from 44% in January.
The bets on best performing currency were more widely spread for the first time in many months. The euro still d
ominated with 48% but sterling moved up to 19% from 5% in the last survey. The yen was in second place with 21%.
Answering a set of special questions this month most managers said the fall of the dollar against the euro looked likely to continue or perhaps stabilise. In a year’s time some 42% said the dollar would be lower against the euro while the same proportion said it would be trading within 5% of its current rate.
The sentiment was similar when looking at the dollar on a trade-weighted basis, which takes into account the relative weight of America’s trading partners. About a third said it would be within 5% of its current level while close to half said it would be lower.
Chinese currency
Most managers said there was a chance the Chinese renminbi, which is currently pegged to the dollar, would be allowed to move more freely. Only a quarter said it was either unlikely or very unlikely.
To combat the impact of adverse foreign exchange movements on fund returns some 68% of fund groups surveyed did allow, in principle, their international funds to hedge their currency exposure.
Asia was expected to have the best performing stockmarket over the next year. Asia excluding Japan topped the list with almost half the votes. Japan followed with 17%. Managers said Britain would be the worst performer with 38% but America was a close second with 32%.
It seems investors will have even more choice of funds. About three-quarters said more funds would be launched than closed over the next 12 months. Perhaps not surprisingly some 92% of groups were planning to launch new funds themselves.
Half of managers said share funds would dominate fund launches. Balanced funds followed with 25%.
Morningstar’s European offices conducted the survey from February 16th-23rd. Some 62 fund groups from 12 countries participated. On average they each managed €48 billion (£32 billion) and offered 91 retail funds.
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