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Money managers under the microscope

from Global Investing:

Banks lead the equity sector flows

Banks and financials stocks have had a pretty good year. The Thomson Reuters Global Financials index is up by more than 20% in the last 12 months, and although the detritus of the financial crisis still offers the occasional sting, investors are starting to see brighter spots for the industry.

That confidence is increasingly obvious in the fund flows.

Our corporate cousins at Lipper track more than 7,000 mutual funds and ETFs which are dedicated to specific industry sectors. Dig a little into the data in this subset of funds, and you start to get a pretty good picture of where the biggest bets have been placed.

Just shy of 500 of these funds are focused entirely on banks & financials. Together they hold more than $46 billion in assets.

Last month, they suffered a total net outflow of just about $1 billion, but on a one-year view, 10 months of net inflows have driven an injection of over $10 billion. It amounts to a concerted bet on the sector, particularly in the U.S. where the bulk of assets are held, with the inflows equating to 22% of the latest published assets under management. You can see the evolution over the year in the chart below; cumulative gains or losses over the 12 months are shown in the blue area; monthly flows are shown by the red bars.

from Global Investing:

Rotation schmotation

We're at risk of labouring this point, but there has been some more evidence that this year's equity rally has not been spurred by a shift away from fixed income. The latest data from our corporate cousins at Lipper offer pretty definitive proof that there has been no Great Rotation, at least not from bonds to stocks.

Worldwide mutual fund flows numbers for February showed an overall move into equity funds of more than $22 billion, and a net flow to bond funds of about half that. Over 3 months it's a similar story, with a net inflow to equities of about $84 billion while bond funds sit close behind at about $75 billion. Little wonder then that there is some evidence at least of movements out of money market funds.

from Global Investing:

What flows out, must flow in?

Much has been made of the flows into U.S. equities this month. Funds have rolled out the red carpet for a record $11.3 billion or so in net inflows over the first two weeks of the year, more when you factor in ETFs.

Just to cool the enthusiasm a little, it's worth remembering that this comes after a torrid 2012.

from Global Investing:

No BRIC without China

Jim O' Neill, creator of the BRIC investment concept, has been exasperated by repeated calls in the past to exclude one or another country from the quartet, based on either economic growth rates, equity performance or market structure. In the early years, Brazil's eligibility for BRIC was often questioned due to its anaemic growth; then it was the turn of oil-dependent Russia. Over the past couple of years many turned their sights on India due to its reform stupor. They have suggested removing it and including Indonesia in its place.

All these detractors should focus on China.

China's validity in BRIC has never been questioned. Aside from the fact that BRI does not really have a ring, that's not surprising. China's growth rates plus undoubted political and economic clout on the international stage put  it head and shoulders above the other three. And after all, it is Chinese demand which drives a large part of the Russian and Brazilian economies.

from Global Investing:

SocGen poll unearths more EM bulls in July

These are not the best of times for emerging markets but some investors don't seem too perturbed. According to Societe Generale,  almost half the clients it surveys in its monthly snap poll of investors have turned bullish on emerging markets' near-term prospects. That is a big shift from June, when only 33 percent were optimistic on the sector. And less than a third of folk are bearish for the near-term outlook over the next couple of weeks, a drop of 20 percentage points over the past month.

These findings are perhaps not so surprising, given most risky assets have rallied off the lows of May.  And a bailout of Spain's banks seems to have averted, at least temporarily, an immediate debt and banking crunch in the euro zone. What is more interesting is that despite a cloudy growth picture in the developing world, especially in the four big BRIC economies,  almost two-thirds of the investors polled declared themselves bullish on emerging markets in the medium-term (the next 3 months) . That rose to almost 70 percent for real money investors. (the poll includes 46 real money accounts and 45 hedge funds from across the world).

from Global Investing:

Emerging stocks: when will there be gain after pain?

Emerging equities' amazing  first quarter rally now seems a distant memory. In fact MSCI's main emerging markets index recently spent 11 straight weeks in the red, the longest lossmaking stretch in the history of the index.  The reasons are clear -- the euro zone is in danger of breakup, growth is dire in the West and stuttering in the East. Weaker oil and metals prices are hitting commodity exporting countries.

But there may be grounds for optimism. According to this graphic from HSBC analyst John Lomax, sharp falls in emerging equity valuations have always in the past been followed by a robust market bounce.

from Jeremy Gaunt:

Don’t invest in gold?

Bit of fun, this -- and might raise some issues about returning to the Gold Standard. The S&P 500 stock index priced in gold (thanks to Reuters graphics whiz Scott Barber):

Equities - SP 500 priced in dollars and gold

INSIDER-Bullish Outlook for Stocks for 2011

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Investors lifted their exposure to stocks to a 10-month high in December, according to a Reuters poll. Nordea’s Asbjorn Trolle Hansen says they are right to be bullish about 2011.

Manager warns of US government bond bubble

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Those investors still gobbling up US government bonds as a nice defensive investment could be in for a nasty surprise, according to James Montier, a member of GMO’s asset allocation team.

Speaking at the CFA Institute’s European Investment Conference in Copenhagen, Montier said there was currently no margin of safety for investing in bonds as yields were just too low. “Rather than being a risk-free asset this could be about to become a return-free risk,” he said. “Historically, when people have bought bonds at these levels they have received a zero return or worse.”

Trimming equities in the summer freeze…

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- Leading investors around the world barely changed their exposure to assets in August, trimming equities slightly in favour of bonds, where they loaded up on top-notch corporates, Reuters polls showed on Tuesday.

Leading investors around the world barely changed their exposure to assets in August, trimming equities slightly in favour of bonds, where they loaded up on top-notch corporates, Reuters polls showed on Tuesday.

Watch the video by clicking the link below:

http://insider.thomsonreuters.com/link.html?ctype=groupchannel&chid=3&cid=138985&start=0&end=356&shareToken=Mzo0ODRmYWMyYy1kMjgxLTRhNjMtYmRjZS1iN2ZkYmY3OTNjNjY%3D

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