The View | Merrill’s latest fund manager survey is flashing a warning on these crowded trades
Global investors are expecting an awful lot from both the Fed and the European Central Bank which have already spooked markets on more than one occasion
Investors are ignoring their own warnings
The monthly Global Fund Manager Survey by Bank of America Merrill Lynch (BAML) is one of the most authoritative surveys in financial markets. In canvassing the views of 200 or so institutional, mutual and hedge fund managers around the world with some US$600 billion of assets under management, the report provides an overview of investor sentiment and sheds light on the key factors influencing the asset allocation decisions of money managers.
Its findings, therefore, deserve close scrutiny.
The results that receive the most attention are those that pertain to the vulnerabilities in markets, particularly the sectors or asset classes which the survey’s respondents deem to be the most crowded, or riskiest, trades.
In the latest survey, carried out between July 7 and 13 and published last week, a crash in global bond markets supplanted a tightening in Chinese credit conditions as the biggest “tail risk”. In a further sign of the extent to which fund managers are increasingly concerned about the conduct of monetary policy, a policy mistake by the Federal Reserve or the European Central Bank was cited as the second biggest tail risk.
