Europe’s Biggest Asset Manager Favors Cash Amid Growth PessimismGiles Broom
Amundi, Europe’s biggest asset manager with almost $1 trillion of funds, said it increased cash holdings at the expense of equities and high-yielding bonds because global growth may be weaker than expected next year.
“Forecasters remain too optimistic about global growth for 2014,” Didier Borowski, head of strategy and economic research at Amundi, said in an interview in Geneva last week. “We have to be very cautious on risky assets in the short term.”
Amundi, which mainly invests on behalf of institutions, said diversified funds have as much as 55 percent of assets in cash as a weaker economic outlook deters riskier investments.
Economic forecasters are too optimistic as government austerity programs in Europe curb growth, Borowski said. Amundi, owned by two of France’s three biggest banks, Credit Agricole SA and Societe Generale SA, increased cash allocations after Federal Reserve Chairman Ben S. Bernanke said in May that the central bank may begin curtailing fixed-income purchases.
The Stoxx Europe 600 Index fell 8.2 percent since Bernanke spoke, while the MSCI World Index dropped 4.9 percent. Borowski said stocks may decline further if companies and analysts revise down their earnings expectations on weaker-than-expected growth in 2014.
The global economy is expected to grow 3 percent in 2014 compared with 2.13 percent this year, according to data compiled by Bloomberg.
Concern over public finances in Europe’s more indebted countries and the possibility Spain and Portugal may have to restructure their debt is discouraging Paris-based Amundi from acquiring more equities. Still, market declines may prompt Amundi to increase equity investments later this year, Borowski said, adding that may only happen after German federal elections on Sept. 22.
Cash allocations in absolute return strategies doubled to 30 percent over the past month, Alain Pitous, head of global balanced solutions and deputy chief investment officer at Amundi, said on June 27 in an e-mailed response to questions from Bloomberg News.
Sales of high-yield bonds and emerging-market equities and debt helped generate cash, Pitous said.
Amundi had 746.2 billion euros ($970 billion) of assets under management at the end of March. It was Europe’s biggest asset manager, Amundi said, citing 2012 figures published last month by Investment & Pensions Europe.