Threats of trade wars and protectionism are prompting sovereign wealth investors to underweight U.S. assets this year, as cash allocations rise, Reuters reported, citing the Sovereign Wealth Fund Institute Inc.'s Global Asset Owner Survey.
The percentage of sovereign investors who expressed skepticism about U.S. assets rose to 43% in February 2018 from 25% in December 2017. Survey participants, which include 25 pension funds, sovereign wealth funds and other public asset owners with an estimated $1.21 trillion in assets, voiced their concern about recent stock market volatility, sparked by investor fears over the end of easy money, and a possible global trade war.
The percentage of investors who plan to overweight U.S. assets fell to 8.7% from 20.8% in the last survey. Almost of a third of survey respondents planned to underweight passively managed global equities, compared to 14.3% in the December 2017 poll. Some 45.5% plan to raise allocation in Europe excluding the U.K., a percentage and trend that has remained unchanged in the last two surveys.
The percentage of asset owners saying they planned to overweight cash in the next 12 months increased to almost 50%, up from 41.7% in the previous quarter. Some 25% of respondents are considering underweighting cash.
Just under a third of investors continued to identify U.S. technology stocks as the most crowded trade. Some 30.4% of respondents said they planned to underweight IT stocks in the next 12 months, up from just 9.5% in the prior quarter. Half of survey participants said they would overweight private equity, up from 29.2% in December 2017.
Some 52.6% were considering an overweight exposure private infrastructure, up from 30.4% in the last poll.
"It is too early to properly wargame the effects of President Trump's action on tariff policy, but it has created a level of anxiety among the global institutional investor class," Sovereign Wealth Fund Institute President Michael Maduell said.
