Advisers: Treasuries out, emerging markets in

Financial advisers plan to dump Treasury bills and fixed-income investments from their clients' portfolios this year in favor of equities, according to a recent survey. In a March survey of 805 financial advisers by Aberdeen Asset Management Inc., U.S. and emerging-markets equities were the clear favorites, with 46% of the respondents saying they plan to increase allocations to U.S. equities and 38% saying they plan to bump up exposure to emerging market equities. Only 6% said they would cut exposure to the U.S. and 10% said they planned to cut emerging-markets holdings. Treasury bills are on the outs, with 58% of respondents saying they will cut those holdings, while only 4% plan to add more. Fixed income also takes a hit, with 42% reducing holdings and 9% increasing their fixed-income allocation. The only categories of fixed income that were more in favor than disfavor are emerging-markets fixed income, which 28% plan to increase and 14% plan to cut, as well as global-developed fixed income (22% increasing, 17% decreasing) and high-yield bonds. Global-developed equity and U.S. small-cap investments also will get bigger allocations from just over 30% of advisers, while 8% say they will cut global-developed equity and 13% plan to cut their small-cap exposure. U.S. real estate is also on the buy side for 28%, while 14% plan to cut. “We believe that the survey reveals two forces at play,” Gary Marshall, chief executive officer at Aberdeen, said in a statement. “One shows investors' increased risk appetite for equities in general, which is consistent with the findings of other studies. The other is the widening of investor appetite from a previous strong ‘home country' bias to a more diversified international portfolio.” Advisers picked mutual funds as their preferred international investment vehicle, with 60% choosing open-end mutual funds, compared to 24% who said they preferred exchange-traded funds. Forty-four percent of the advisers said they recommend an allocation of between 6% and 10% to emerging-markets equity funds; 25% of advisers polled will recommend that clients allocate between 11% and 20% to emerging-markets equity funds. Emerging-markets fixed income gets a 0% to 5% allocation from 43% of advisers and 35% of advisers go a little higher and will recommend 6% to 10% be allocated to emerging-markets fixed income funds.