| Caution seems the watchword among the
institutional investors surveyed in our latest portfolio poll. The allocation of
money between equities, bonds and cash has. on average, remained at the same
levels as it did during the third quarter. While Lehman Brothers and Commerz
International have increased their overall equity allocations. Daiwa has
increased its bond allocation. But given the slowdown in the American economy,
it is the reaction of our investors to American equity holdings that is worthy
of note. While three of them. including Lehman Brothers, take a dim view of the prospects for American shares, the other four have either marginally increased their allocations, or have maintained them at the same levels as in the previous quarter. Lehman Brothers seems to have decided that the prospect for German shares is better than it is for American ones. Its allocation for American equities dropped by seven percentage points, to 45% of its equity holdings; while its German share portfolio increased by six percentage points, to 11%. Lehman's share allocation to America has dropped, even as its overall equity holdings have increased. Daiwa and Standard Life are the other two that have cut back on American equities. But Credit Suisse continues to be a cheerleader for American shares. Following its ten percentage-point increase in the third quarter, the Swiss firm increased its exposure to American equities once again in the fourth quarter. Commerz International appears to share Credit Suisse's bullish outlook: its American equity holdings have increased by four percentage points, to 490. Julius Baer is extremely bullish on American equities, with 60% of its equity funds parked there. But the average American equity holdings, among our institutional investors dropped by a percentage point in the fourth quarter. British equities seem to have become attractive—all our investors have increased their allocations. Credit Suisse, which in the third quarter cut its investment in British shares, appears to have changed its mind. It has increased its allocation by four percentage points, taking the total to 9%. On the other hand. Japanese shares have been given the thumbs-down: all our investors save Julius Baer (unchanged) and Credit Suisse (slightly up) have moved funds out of Japanese equities. It is a relatively similar story for Japanese bonds, where everybody apart from Commerz International has either dropped their yen-denominated bond holdings, or kept them unchanged. Robeco Group seems decidedly bearish, for it has sharply, cut its allocation, from 24% to 15%. Lehman Brothers. appears to have got the timing right, by raising its allocation of dollar-denominated bonds in the fourth quarter. Its increase was followed by the Fed interest-rate cut on January 3rd. Will Lehman's bearish timing prove right for American shares, too? |