CFA UK sees major asset classes overvalued

The latest CFA UK Valuations Index points to a rise in perceptions of asset classes being overvalued.

The Index, which is based on responses from members of the CFA Society of the UK, has found that the perception rose through the past quarter, and also found that expectations of decoupling between developed and emerging markets had increased.

The assets affected include developed market equities, government bonds and corporate bonds. The greatest change in perceptions was seen for government bonds and developed market equities.

The Index results suggest 44% of those surveyed – UK professional investors – felt that developed market equities were overvalued or very overvalued – against a score of 37% for the previous quarter.

The proportion who feel that developed market equities are undervalued or very undervalued has fallen to 22% from 27%.

Government bonds remain seen as the most overvalued asset class, with 78% of respondents rating them as somewhat or very overvalued. Just 6% view this asset classe as undervalued, or very undervalued.

Some 66% of respondents view corporate bonds as overvalued.

Surprisingly, perhaps, the sentiment towards gold remains relatively unchanged, with some 48% of respondents viewing it as overvalued.

Will Goodhart, chief executive of CFA UK, said: “During Q3, there had been signs that our members believed we were moving towards a normalised market, with the diversity of investor opinion over the valuation of different asset classes narrowing. The final quarter of 2013 marks a reversal of this trend, with the perception that asset classes are overvalued rising across the board, most markedly in developed market equities and government bonds. It appears that members see the stimulative central bank monetary policies as having inflated asset values broadly with most respondents to this quarter’s survey feeling that they are only properly paid to take risk in emerging market equities.”


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