The largest investment funds fear the volatility of world markets, so out of the exchange of assets by investing in currency. This is evidenced by survey Bank of America, writes Reuters. In real terms the amount of investment in cash amounts to tens of billions of dollars, and in specific gravity among other assets peaked in 15 years.
Just survey Bank of America took part 213 investment Fund managers, asset managers totaling $654 billion By early June, the average share of cash assets in these funds rose to 5.7% (from 5.5% in may — the highest since November 2001. “Norm” is the proportion of cash management in the range of 3.5% to 4.5%. If the amount of currency among the assets of the Fund drops below these values, market players begin to sell securities, and Vice versa.
Now investors prefer to sell shares and are reluctant to invest in bonds. According to Bank of America, since the beginning of year international equity funds withdrew from around $106 billion mostly from the emerging markets. Part of the funds investors move into government bonds, but yields the most stable bonds is near historic lows.
On Monday, the yield on German bonds with ten years maturity (bonds of ten years are considered a leading indicator, benchmark) for the first time in history became negative. Last week bonds with a zero rate issued by Switzerland, and in early March the Ministry of Finance of Japan sold the first batch of bonds with a negative yield.
The yield decrease up to negative values was the result of the policy of reducing base rates in Japan and Europe with the concurrent redemption of securities by Central banks. Such a policy of “quantitative easing” designed to stimulate economic growth, “injecting” money into the economy and forcing banks to do the same thing (trying to make the placement of funds in banks unprofitable).
And yet, many investors prefer to exit high-risk bonds, trusting money powers with stable economies, even despite the minimal or negative returns of such bond. The ultimate failure of “quantitative easing” is called among the most urgent unlikely risk (tail risk) about 18% of the investors from a survey of Bank of America.
However, the most discussed of such tail risk (extreme change with a probability of 0.3%) for the world economy is entering the UK from the EU: it was mentioned by 30% of respondents. On the eve surveyed by Bloomberg financial experts predicted that in such a case, the pound will fall the U.S. dollar to a minimum over the past 30 years.