The bullishness US advisers were exhibiting in the second quarter of 2011 has all but evaporated with a contraction in their appetite for a broad base of asset types between July and end of September.
The latest CoreData Research Fahrenheit report, a quarterly research tool for pooling the aggregated investment expectations of US investment professionals across 60 product types, reveals adviser outlook has fallen to more than 85% of the categories covered in comparison with the period spanning April to June 2011.
Despite the relative slip in bullishness, the underlying appetite for a wide range of stocks remains robust and healthy.
For example, big is beautiful as advisers put their faith in large domestic listed companies despite the morose nature of the situation in the US at present with the two main political parties at loggerheads on the fundamental issue of the national debt.
Large value funds received the highest rating, in terms of adviser intent to place client assets into them.
For domestic stock funds, large value products scored 167 on the Fahrenheit thermometer. And although this was down 26 points compared to the previous quarter, this asset type still holds the greatest appeal for advisers.
In their choice, advisers look to be trend-following to some degree. Large-cap value funds have performed well this year.
Examples are the ING Corporate Leaders, which has returned 12.72% year-to-date to end of May 2011 and the AllianceBernstein Growth and Income fund which posted YTD performance of 8.79%, to mid-July 2011.
As uncertainty around oil prices persists, funds focused on natural resources also capture adviser interest, in terms of domestic exposure. These funds scored 150, but this relatively high score masks the fact that their charm has been severely tarnished over the quarter as this number represents a drop of 56 points.
The commodities markets are notoriously challenging to invest in. This is due to the fact that most commodities investors cannot hold the physical assets but have to use futures to gain exposure.
The decrease in natural resources’ allure over the quarter suggests advisers have been keeping a watchful eye on these funds. This is because while some natural resources products performed well, others produced dismal returns.
Year-to-date, the JPM Global Natural Resources returned -11% while the BlackRock World Mining Fund came in at -5.8%, YTD.
The domestic fund products revealed the biggest growth in an appeal to be healthcare and consumer staples. Healthcare is considered to be a defensive sector. Therefore this spike (16-point increase) could indicate that advisers are wary of what lies ahead and are looking to place money in familiar territory.
Independent US advisers favour healthcare funds more than the wirehouses do, revealing a difference of 16 points. This could be because independent houses feel they need to be more cautious in their approach, perhaps?
*The above are just three categories of the Fahrenheit quarterly tracker. If you would like more information on the remaining 57 fund categories or the general fund flow levels US advisers anticipate placing between now and the end of September, please contact the CoreData Research New York office on +1 646 875 8901.