Eurozone debt fears mount for advisers

Fears that debt in the Eurozone will hamper investment growth over the next six months have mounted, according to Barings’ latest survey of professional investor sentiment.

Eurozone debt poses the greatest macroeconomic risk to investment growth, a regular survey of industry professionals in the UK and Channel Islands by Baring Asset Management has revealed.

The proportion of respondents who said they feared the impact of eurozone debt increased to 68% over the period 15 December to 12 January, up from 46% in the 15 September to 13 October period.

The Irish debt crisis and deepening problems in Portugal fuelled those concerns, particularly during December on the back of Ireland’s Eur85bn bailout by the IMF on 28 November 2010.

General levels of anxiety over a second banking crisis also intensified. The proportion who thought this could happen increased to 30% from 18% at the last survey.

Fewer respondents expressed unease a double-dip recession would take place. Just 7% said they saw it as a threat to growth, compared with 21% beforehand.

However, concerns over the impact of inflation grew; 32% of respondents said it presented a significant challenge to investment growth, up from 14% in the previous survey.

Meanwhile 74% said their clients feared a deteriorating effect on their cash investments, and 86% planned to reallocate their cash investments to inflation-protected assets, such as equities, inflation-linked bonds, or property.

Fixed income was also flagged up. Almost two-thirds, or 66%, of those surveyed said they were advising clients to decrease their exposure to the asset class. This was an increase on the proportion, 53%, who gave similar advice in the previous survey.

Barings interviewed 171 investment professionals for its December-January results, and 168 for its September-October results.

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