According to the fourth bi-annual High Net Worth Asset Allocator report by Scorpio Partnership, in the past six months many wealth managers have reduced equity and fixed income exposure and moved money into cash.
But 44% of the 31 international wealth management firms surveyed expect to increase their allocation to equities significantly in the first half of the New Year, while 24% plan to reduce their fixed income allocations, particularly to government bonds.
Of the wealth managers surveyed, 39% said their discretionary mandates no longer conformed to their model portfolios, an increase of 12% since May. This also trumped the previous high of 36% in the fourth quarter of 2009.
Scorpio Partnership said since 2009, when its first survey was undertaken, wealth managers have reassessed their strategies across all asset classes "in response to changing economic and market factors".
"International wealth managers are faced with the daunting task of preserving capital and generating return in this environment. If respondents are true to their plans, we should see a marked increase in equity, private equity and real estate exposure when we next conduct the survey in Q2 2012," explained Catherine Tillotson managing partner of Scorpio Partnership.
Investors less convinced
Data from Capita Registrars suggests investors left to their own devices might think otherwise.
In its December Private Investor Watch, the share registration provider said private investors had reduced shareholdings for the first time since spring 2010.
Between September and November 2011 they sold £695m of their investments, after five consecutive quarters of buying.
This was the most aggressive quarter of selling since September 2009, when investors took advantage of a strong rally in share prices to take profits following the global financial crisis.
Charles Cryer, chief executive of Capita Registrars, said: "Investors opted enthusiastically for equities as they searched for an asset class to protect them from high inflation [in the first half of 2010]. But in the middle of the year their optimism became detached from the sharply deteriorating economic situation.
"The acceleration of the euro crisis since the summer has only made that situation worse. Investors are clearly getting worried – they have taken advantage of the FTSE’s recovery from its summer lows to sell shares for the first time since mid-2010."
Cryer said the lack of investment alternatives to protect the real value of investors’ savings would mean investing in equities should still make sense for those with a longer time horizon, however, particularly as they still provide an attractive income.
To that end Rob Pemberton, investment director at HFM Columbus said he would continue to favour funds with a defensive mind-set in 2012, especially if they generate a significant income yield.
He said this is always a good starting point in generating a substantial investment return over the longer term.
For this his favoured sectors continue to be Equity Income in both the UK and globally, through Invesco Perpetual Income, Artemis Income, Newton Global Higher Income and Lazard Global Income.
