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Investment Managers Survey
Over the quarter, we saw more managers actively reducing weighting to equities and holding more cash due to concerns over the war in Ukraine, inflation and the central banks’ likely response. Many Sterling managers underperformed the market due to a persistent underweight in energy and resources in favour of growth stocks, in particular US technology giants. The dollar fared well, with around 30% of managers looking to increase their FX exposure again this quarter; there was also increased interest in holding more gold in portfolios after a long period of broad indifference to this asset. This quarter, the gradual creep into alternatives continued with managers looking to infrastructure and hedge funds.
Almost all managers reported that they were increasingly cautious / pessimistic about the economic outlook compared with last quarter. Most cited increasing energy, the spectre of further supply-side disruptions due to China’s draconian lockdown policy and the prospect of policy error from Central Banks as major concerns. When asked, nearly half of managers said it was likely that the UK economy would enter a period of stagflation, characterised by high inflation, high unemployment and low growth, in next 12 months.