Fund managers seek new avenues for higher yield

For the remainder of 2012, global managers remain neutral on both bonds and equities as they broaden their search for higher yield in a low growth environment.

That's according to the latest HSBC Fund Managers' Survey, which found that 60 per cent of fund managers - representing 16.7 per cent of global funds under management - were neutral on equities for the December quarter, with 40 per cent found to be bullish, due partly to the European central banks' easing policy supporting a desire among this group for more risky assets.

The report also found 60 per cent of fund managers are overweight in North American equities, while 57 per cent maintained neutral views on China amid policy easing and a predicted slowdown in growth.

Similarly, 75 per cent of respondents were bullish when it came to Asian bonds.

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Bonds remained attractive particularly for yield-seeking investors, but equities have "long-term appeal underscored by the attractive dividend yield pickup over bonds", according to Geoff Pidgeon, head of global asset management for HSBC Bank Australia.

"This is quite a large problem for bond investors, where you've got returns on US and Euro bonds at an all-time low," he said.

"Typically, investors in times of stress will flock to these safe haven markets, but right now, and probably for the first time in history, these markets aren't safe anymore."

Global emerging market bonds continue to be favoured by 70 per cent of fund managers (up from 50 per cent in the preceding quarter), and 90 per cent were found to be overweight in high yield bonds, according to the survey.

The resilience of Asia's corporate debt fundamentals is now making Asian debt and bonds more appealing to investors, Pidgeon said.