Debt crisis seen as “significant threat” to investment growth – survey

Investment professionals are concerned about the eurozone debt crisis and inflation while emerging markets and Asia grow more attractive, according to research by Baring Asset Management.

Uncertainty over the ability of over-leveraged economies to reduce their debt is considered to be “one of the most significant threats to investment growth over the next six months,” according to the latest survey of investment professionals for Barings Investment Barometer.

Nearly two-thirds (65%) of respondents see the uncertainty as the biggest global macroeconomic investment challenge, compared with 51% of respondents in the previous survey.
Worries about the Eurozone sovereign debt crisis continue to contribute to the subdued outlook for growth, although the number of respondents concerned declined slightly this from 68% to 65%.

Fears of a second banking crisis have declined but more respondent are worried about the possibility of a double dip recession.

The survey found that fears about inflation were increasing, with 42% of respondents saying this posed a challenge to investment growth – up 10 percentage points on the last survey. Some 82% of respondents said the impact of inflation on cash investments was their clients’ biggest worry. More than three quarters say their clients have already, or plan to, reallocate cash investments to inflation-protected assets.

Emerging market equities, global equities and Asian equities (excluding Japan) remain the most favoured asset classes for more than 90% of respondents.

Almost half of respondents are encouraging investors to increase their allocation to emerging market equities, and more than a third believe now is a good time for investors to increase their exposure to Asian equities. Fixed income investments are less favourably viewed, with nearly two thirds of respondents advising their clients to reduce their exposure in these assets.

Intermediaries are advising their clients to further diversify their investments and recommending more regular reviews of investment portfolios with a rising popularity for multiple asset products.

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