Research

Investors reassessing main asset classes, says CFA UK

Investors are reassessing the relative value of the main asset classes, according to research released by the CFA Society of the UK (CFA UK).

The CFA UK Valuations Index reveals that almost half of investment professionals (49 per cent) currently view developed market equities as overvalued, up from 39 per cent last quarter, while just 16 per cent view them as undervalued – the lowest proportion since the index was first published in 2012. 
 
There has also been a shift in opinion regarding government bonds and gold in the last quarter, with fewer investment professionals viewing the traditional ‘safe havens’ as overvalued; the proportion of investment professionals viewing government bonds as overvalued has fallen to 71 per cent from 76 per cent, while only around a third (36 per cent) now view gold as overvalued, down from 46 per cent in Q1 2014, and a high of 61 per cent in Q1 and Q2 of 2012.
 
Opinions on emerging market equities are broadly unchanged from last quarter. Only one in five investment professionals (20 per cent) currently view them as overvalued, compared to 57 per cent who see value in the asset class.
 
Will Goodhart, chief executive of CFA UK says: “Investor sentiment has shifted in the last quarter, with a proportion of investment professionals changing their views on three of the five asset classes covered in CFA UK’s research. Expectations that central banks may delay interest rate rises, given recent economic data and an increasingly benign inflation outlook, appear to be encouraging some investment professionals to reconsider the relative value of debt and equity investments. With both the FTSE and S&P indices hovering around record highs, our data suggests that investors should perhaps be cautious about reaching for yield in developed market equities when investment professionals view that yield premium as vulnerable.”

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