U.S. fund managers cut their high exposure to equities in August and raised their bond allocations amid mounting fears of a double-dip recession, a Reuters poll showed on Tuesday.
On average, funds held 61.5 percent of their assets in equities, compared with 65.0 percent a month earlier, the poll of 14 U.S.-based fund management firms surveyed from Aug. 17 to 30 showed.
Exposure to fixed-income securities, including government and corporate and high-yield "junk" bonds, rose to 31.8 percent in August from 29.8 percent in July.
There were changes in the sample in August, but on a like-for-like basis the direction was the same.
"We are reducing risk because the recent economic figures suggest things are really slowing down," said Keith Wirtz, chief investment officer at Fifth Third Asset Management, a Cincinnati, Ohio-based firm that oversaw $17.8 billion as of March.
Lingering uncertainty about the global economic recovery has kept stocks under severe selling pressure.
The benchmark Standard & Poor's 500 Index has fallen roughly 4.8 percent in August, and the Dow Jones industrial average dropped about 4.4 percent in the same period. In mid-August, the Federal Reserve jolted markets with a shift in policy.
Acknowledging that "the pace of recovery in output and employment has slowed in recent months," the U.S. central bank said it would use the proceeds from its huge mortgage-bond portfolio to buy long-term Treasury securities.
The move fuelled even more buying in the 30-year Treasury bond, arguably this summer's hottest investment.
For the month, long-dated Treasuries have beaten every other U.S. fixed-income market. Treasuries maturing in more than 20 years — a sector comprised mainly of 30-year bonds — posted returns of 5.07 percent in August, according to data from Barclays Capital.
The rally could continue. On Friday, the U.S. government said gross domestic product grew at an annual pace of 1.6 percent in the second quarter, down from the 2.4 percent it had initially estimated a month ago.
"In this environment, holdings of long Treasury paper will serve not only as a safe haven, but an asset whose value will appreciate significantly," said Van Hoisington, who oversees the $171 million Wasatch-Hoisington U.S. Treasury Fund.
The fund is up roughly 20 percent so far this year through mid-August, according to Lipper. The group polled by Reuters also raised exposure to cash in August. Their cash allocations moved to 3.1 percent in August, from 2.0 percent in July.
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