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Fund
managers demanded a more diverse range of performance
benchmarks because of the massive increase in demand
and supply of corporate and high-yield bonds in Europe
last year.
Investor
demand for these higher-yielding bonds increased because
of the low yields on European government bonds, particularly
in the eurozone where the European single currency resulted
in government bond yields of the 11 member states moving
down in line with German yields.
The
survey also found 25 of the 50 equity-fund managers
polled were overweight in French equities, while 75%
of all fund managers expected the euro to rise against
the dollar
in 2000.
The
following questions were asked:
Which
indices are you using?
Bond indices provided by three investment banks –
Warburg Dillon Read, Merrill Lynch and Morgan Stanley
Dean Witter – were cited in the Euro 100 survey
for the first time.
They
joined the bond indices already provided by investment
banks JP Morgan, Salomon Smith Barney, Lehman Brothers
and information provider Bloomberg, which makes available
on its screens the Effas index devised by the European
Federation of Financial Analysts’ Societies.
JP
Morgan’s bond indices remained in first place with
21 out of the 50 bond-fund managers using them as benchmarks,
although this was down from 30 managers in the third
quarter. The Salomon index was close behind JP Morgan
in the final quarter with 20 users.
Newcomer
Merrill Lynch’s index family, cited by 11 managers,
was in third place. It displaced the Lehman Brothers
index family, which fell to fourth place in the final
quarter with eight users. The Bloomberg/Effas index,
itself first mentioned by managers in the third-quarter
survey, dropped to fifth from fourth place.
Preston
Peacock, portfolio strategy group vice-president at
Merrill Lynch in London, says Merrill has intensively
promoted the bond index in Europe since its creation
in March 1998.
Morgan
Stanley Capital International’s (MSCI) equity price
indices remained the favourite with equity fund managers
in the final quarter of 1999. Thirty-three of the 50
equity fund managers used them.
The
FTSE European indices were second with 16 users and
information company Dow Jones’ Stoxx indices were
third with 13 managers citing them.
Twenty-four
equity fund managers used more than one of the index
families to create customised
benchmarks.
In
which markets are you over or underweight?
European equity fund managers focused their investment
on France in the final quarter of 1999 with half of
those surveyed overweight and none underweight in French
equities.
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100 survey
