Bitcoin is the most crowded trade globally, says BofA Fund Manager Survey

Going ‘long bitcoin’ is the most crowded trade with 43 per cent of the fund managers surveyed in May by BofA Securities agreeing to this; followed by going long on technology, long ESG, and shorting US treasuries. However, 75 per cent of those surveyed suggest bitcoin is in a bubble zone. 

An overall total of 216 panelists with $625 billion in assets under management (AUM) participated in the survey between May 7 and 13. 194 participants with $592 billion in AUM responded to the Global FMS questions, while 78 participants with $133 billion in AUM responded to the Regional FMS questions, BofA Securities said.

From around $9,700 levels a unit in May 2020, the sharp rally in bitcoin has taken investors and analysts by surprise with the crypto hitting the $63,000 mark in early April this year - translating into a phenomenal rise of nearly 550 per cent during this period. The unit was invented in 2008 and launched in 2009. Over the years, this crypto currency has become investible option for institutions and retail investors.

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The spectacular surge in bitcoin has lured traders and investors alike to the cryptocurrency. Christopher Wood, global head of equity strategy at Jefferies trimmed exposure in gold last December in favour of bitcoin in his long-only global portfolio for US dollar-denominated pension funds. 

Recently, S&P Dow Jones had launched three crypto currency indices on Wall Street - the S&P Bitcoin Index, S&P Ethereum Index and S&P Cryptocurrency MegaCap Index.

Emerging markets to lag developed peers

As an asset class, 29 per cent of the fund managers surveyed believe the S&P500 will outperform in 2021. Oil has now risen to the second spot with 25 per cent of the fund managers surveyed globally expecting it to outperform, up 11 per cent compared to April levels, followed by emerging markets at 20 per cent.

“48 per cent of FMS investors think value will outperform growth in the next 12 months. It continues to be the most favoured factor in the last six months with the exception of small cap in February 2021. The three-month FMS investor optimism on commodities still near all-time highs. Commodities' net asset allocation is now 27 per cent in their portfolios, up 4 per cent month-on-month. 48 per cent of respondents expect the global economy to get 'a lot stronger', down 15ppt from last month,” BofA Securities survey said.

Inflation is now counted as the biggest risk for markets with 35 per cent of FMS investors agreeing to this, followed by taper tantrum (27 per cent) and asset bubble (15 per cent). “In May 2021, a mere 9 per cent cite COVID-19 as the biggest tail risk,” BofA Securities said.