survey reveals that many european fund managers have concerns over the bond market
Managers fear a bubble in the US bond market, according to a survey by Morningstar.
Two thirds of respondents to the research among European fund managers said they were concerned about a bubble ' 27% said there already was one and 40% said there was a risk of one in the near future.
A substantial minority of managers were also worried about a bubble developing in euro-zone bonds and gold ' 13% said there was already a bubble in the euro-zone bond market and 33% said there was a danger of one, while 20% fear a bubble in the gold market in the near future and 20% said there already was one.
The results could be a signal that investors should consider other asset classes, according to Morningstar.
Daniel Ben Ami, senior editor of Morningstar UK, said there was risk of a bubble.
'The cause is that there is a lot of anxiety and nervousness in the markets so people have moved to what they considered the safest assets ' the safe havens,' he said.
What happens now depends partly on the economy, he added. If inflation starts to pick up it will be a problem signal for the bond market.
'The budget deficit is also increasing in the US and UK so they need to issue more bonds which is another downward pressure on the market,' he said.
The survey also shows a shift in fund manager concerns. Their main concerns for the next year are related to either economic recovery or earnings, not the Iraq conflict.
Niklas Tell, Morningstar's European editor-in-chief, said: 'Given the weakness of the global economy and the continuing war in Iraq it looks like investors will not have any respite. High levels of volatility are likely to remain. The only certainty is the fear of uncertainty.'
Despite the uncertainty 87% of respondents said their companies were planning fund launches in the next 12 months. Nearly half of respondents said large cap and funds that are neutral between growth and value styles would perform best.
Among fixed income instruments 61% said short bonds would perform better than long and 92% favoured corporate over government. A total of 64 managers from across Europe responded to the survey, which was carried out last month.
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