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US equities are unpopular, even Icelanders sell off

Some 36% of fund selectors our researcher met on her recent trip to the island plan to sell part of their US equity holdings, while none want to increase their allocation. Very much in line with Pan-European sentiment, the asset class to benefit most from the US equity selling will be European stocks. A little…

Some 36% of fund selectors our researcher met on her recent trip to the island plan to sell part of their US equity holdings, while none want to increase their allocation. Very much in line with Pan-European sentiment, the asset class to benefit most from the US equity selling will be European stocks. A little over a quarter of local fund selectors plan to increase their allocation, while none are planning a decrease.

 

 

The share of buyers and sellers is generally low in Iceland compared to those leaving their allocation unchanged, because fund selectors on the island can only shuffle their foreign investments around or re-invest their net gains. They cannot pour in net new money because of a ban on converting Icelandic krona into foreign currency, which is in place since the 2008 banking crisis.

ETFs: on the increase

As there are only a couple of analysts in most Icelandic banks and pension funds to look after

 

their foreign investments, index trackers are an attractive option to them. Two wealth managers our researcher met even told our researcher they predominantly use ETFs to get exposure to foreign equity markets. The use of index-tracking products is relatively wide-spread in Iceland. Only 18% do not use them, and almost four in 10 fund selectors plan to increase their allocation further in the next 12 months.

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