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March 02, 2015

Washington, D.C., March 2, 2015 - Global fund investors increased exposure to Euro Area equities in February following the ECB's announced expansion of their quantitative easing program, according to the new monthly Trends in Investment Fund Portfolio Allocation report by the Institute of International Finance.

The IIF has introduced this new monthly report to closely monitor emerging trends in asset allocation of mutual fund and exchange-traded fund (ETF) investors.

"Fund investors have become important players in global asset markets since the aftermath of the 2008 crisis", noted Sonja Gibbs, director of capital and emerging markets policy at the IIF. "In this context, we believe that monitoring fund asset allocations trends between asset classes and countries can be used to help assess the potential buildup of systemic risks in financial markets".

The IIF identified the top five trends below:

  • Weights for U.S. equities down:As investors shifted into Euro Area stocks, the share of U.S. equities in fund investors' portfolios fell in February, for the first time since mid-2014.
  • Allocations to Euro Area bonds have been cut back noticeably since late January,as global investors reduced their exposure to peripheral Euro Area debt, particularly Italian and Greek bonds. This continues the rotation out of Euro Area bonds into U.S. bonds over the past several months
  • Emerging market allocations have stabilized:After a marked retrenchment in fund portfolio weights for emerging market equities and fixed income securities in 2014H2 and earlier this year, weightings for EM assets appear to have stabilized since late January.
  • Institutional fund investors' appetite for emerging market assets remains subdued:Institutional investors' allocations to EM assets via mutual funds and exchange-traded funds (ETFs) stand now at their lowest levels since 2008-9. Retail investors hold more emerging market securities compared to year-ago levels. Yet, differentiation in allocations to emerging market assets has accelerated. ' India, China, Indonesia, Nigeria and Chile have seen the largest rise in allocations since the start of the year while weightings for Brazil, Russia, Mexico and Hungary have declined sharply.
  • China has seen a rise in mutual fund/ETF allocationssince the launch of the Hong-Kong-Shanghai Stock Connect in November 2014. Although this has made it easier for investors to access Chinese domestic markets, China remains under-represented in fund investors' portfolios, particularly given that the country's economy accounts for more than 12% of the global economy. This marked gap suggests significant room for growth.

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The Institute of International Finance is the global association of the financial industry, with close to 500 members from 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. Within its membership IIF counts commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. For more information visit www.iif.com.

Media Contacts

Dylan Riddle

Tel: +1 202.857.3626

Email: driddle@iif.com

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