Portfolio Managers Are On The Move: 3x Increase To PM's Who Plan To Be Active In The Coming Week

The following is a survey constructed by Stone & McCarthy Research Associates.  The questionnaire is first followed by the results, in detail.  What SMRA did was create a poll and surveyed Portfolio Manager's.  What we can deduce from this is a) PM's have been moving cash, rapidly and b) the movements we see in the market over the next few days can be attributed to reallocation and redeployment of side-lined cash.  Worth noting is that on the final table, the percentage of PM's planning to be active has increased from a steady 5% over the past 4 weeks to 17%!

From Stone & McCarthy Research Associates:

Thank you for your cooperation! The survey questions are listed below.

1) What do you estimate the dollar volume of assets under management in your portfolio to be?

2) What do you estimate the dollar volume of cash/cash equivalents in your portfolio to be?

3) What is the numerical value of your bogey (target) duration/maturity?

4) What do you estimate the actual numerical value duration/maturity to be?

5) On a scale of 0 to 10, are you bearish or bullish? Key: 0 is absolutely bearish 5 is absolutely neutral 10 is absolutely bullish

6) Yes, or no. Over the next week, do you intend to adjust your portfolio duration/maturity to reflect your market sentiment?

7) Please indicate approximate % of your portfolio held in:

Treasuries______ Corporates______ Agency______ MBS______ ABS______

8) On a scale of 0 to 10, please indicate your sentiment for spreads to widen (0) or tighten (10)

Summary data is proprietary to SMR clients and made available in SMRA #30 (SMR Money Manager Survey). The results are presented in SMRA #30 on Wednesday. We thank the regular participants for making this survey possible. We also encourage SMR clients who do not participate in the survey to do so.

US Portfolio Survey: Pessimistic on Rates

--Stone & McCarthy (Princeton)- Mixed changes in risk profiles among the participants in this week's SMR Portfolio Manager Survey resulted in little changed to the structural averages, but Survey participants near-term outlook for rates turned particularly negative as they also increased cash positions. A significant number also plan to be involved in the market over the upcoming week.

Changes in Survey participants' allocations included a pullback from the recent surge in Treasury allocations, as well as a decline in Agency allocations. Corporate and MBS allocations increased, while ABS allocations were steady. The Spread Product Expectations Index also held steady at 5.11 this week, reflecting positive outlook for spread product relative to Treasuries. Overall spread product allocations increased to 70.5% from 70.2% last week, which was the smallest spread product allocation reading since April 15, 2008.

The following table summarizes the survey structural statistics for the most recent two weeks.

 The Arithmetic Cash/Assets Ratio ticked up to 3.1% this week from 3.0% last week. The Weighted Cash/Asset Ratio bounced back to 3.2% this week from 3.0% last week, which had been the smallest cash position on an Asset Weighted basis since last November.

So far this year, the Arithmetic Average Cash/Assets Ratio has averaged 2.9% of assets, ranging from 2.6% to 3.1%. The Asset-Weighted Cash/Assets Ratio has averaged 3.3% of assets, ranging from 3.0% to 3.5% of assets.

For Historical Cash/Assets Ratios

The Survey Mean Bull/Bear Index continued to trend lower this week, falling to 4.6 from 4.7. That is the most bearish Survey Mean Bull/Bear Index since April 13, 2010. The Asset Weighted Bull/Bear Index dropped to 4.2 this week from 4.4 last week. That is the most bearish Asset Weighted Bull/Bear Index level since April 3, 2007.

So far this year, the Survey Mean Bull/Bear Index has averaged 4.9, ranging from a low of 4.7 to a high of 5.2. The Weighted Average Bull/Bear Index has averaged 4.6, ranging from the most recent reading of 4.2 to a high of 5.4. A reading of 5 indicates neutrality, with readings above/below indicting a bullish/bearish market sentiment.

For Weighted Market Sentiment

The Arithmetic Actual/Target Duration Ratio held steady at 98.6% of bogey this week. The Asset Weighted Actual/Target Duration Ratio was also unchanged this week, holding at 98.9% of bogey, which is the most defensive the ratio has been since April 12.

So far this year, the Survey Mean Actual/Target Duration Ratio averaged 99.1% of bogey and ranged from 98.5% to 99.7% of bogey. The Asset-Weighted Actual/Target Duration Ratio averaged 99.0% of bogey, ranging from 97.3% to 99.9% of bogey.

For Duration History

As noted above, changes in Survey participants' allocations included a pullback from the recent surge in Treasury allocations, as well as a decline in Agency allocations. Corporate and MBS allocations increased, while ABS allocations were steady. Specifically, average Treasury allocations fell back to 26.5% of overall allocations from 26.8% last week, which had been the largest Treasury allocation since November 2007. Corporate allocations bounced back to 33.2% of allocations this week from 32.9% last week. Agency allocations reversed last week's changed, falling back to 8.3% of allocations from 8.5% last week. MBS allocations ticked up to 25.9% of allocations this week from 25.85 last week. ABS allocations were steady at 3.1% of allocations.

The Spread Product Expectations Index also held steady at 5.11 this week, reflecting positive outlook for spread product relative to Treasuries. Overall spread product allocations increased to 70.5% from 70.2% last week, which was the smallest spread product allocation reading since April 15, 2008.

The following table summarizes asset allocations.

During 2010, Treasury allocations averaged 23.4% of assets, ranging from 22.2% to 24.4%. Corporate allocations averaged 32.8% of assets, ranging from 31.5% to 33.9%. Agency allocations averaged 9.5% of assets, ranging from 9.0% to 9.9%. MBS allocations averaged 27.5% of assets, ranging from 26.5% to 28.8%. ABS allocations averaged 2.8%, ranging from 2.4% to 3.1%. The Spread Expectations Index averaged 5.34, ranging from 4.94 to 5.75.

Over the past five years, Treasury allocations have averaged 24.1% of assets, ranging from 20.3% to 29.5%. Corporate allocations have averaged 30.0% of assets, ranging from 21.3% to 33.9%. Agency allocations have averaged 11.0% of assets, ranging from 8.2% to 15.1%. MBS allocations have averaged 27.8% of assets, ranging from 25.2% to 31.5%. ABS allocations have averaged 3.1%, ranging from 1.8% to 5.3%. The Spread Expectations Index has averaged 5.18 ranging from 4.08 to 6.33.

A 6-week running summary of the survey structural statistics is provided in the following table.