The biggest issues troubling fund managers
Optimism gives way to concern, for now, writes Dave Baxter.
17th March 2026 13:01
by Dave Baxter from interactive investor
Optimism is wilting away among professional investors in the face of the Middle East conflict and worries about the state of the private credit sector.
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The latest issue of Bank of America’s Global Fund Manager Survey found that optimism about global economic growth had “tanked” among respondents in the last month.
The proportion of respondents who expected the economy to be stronger in 12 months has tumbled from 39% to 7% on a net basis, while 45% of respondents expected the CPI measure of inflation to be higher in 12 months, well up from 9% in the last survey.
Optimism about interest rate cuts has fallen to its lowest level since February 2023, although on a brighter note respondents don’t appear to be pricing in a recession for the time being.
That has had a notable effect on portfolio positioning, with the average cash level for respondents surging from 3.4% to 4.3%.
Respondents were 34% net overweight in their exposure to commodities – the highest level since April 2022 – while also taking big exposure to emerging market stocks and maintaining high equity exposure, if largely shunning sectors such as consumer discretionary.
Iran and credit worries take hold
Conflict and its economic consequences are at the forefront of investors’ minds, with geopolitical conflict listed as the number one “tail risk” in this month’s survey. Some 37% of respondents opted for that, while 23% chose inflation.
Other concerns are eating away at bullish sentiment, too. The woes of private credit, seen as heavily exposed to the software sector, have been drawing attention in recent weeks, as have the problems of funds involved in this space.
Those worries are reflected in the latest survey, with 16% of respondents listing private credit as the number one tail risk. Meanwhile, a record 63% said that private equity, or private credit, would be the most likely source of a credit event, followed by the artificial intelligence (AI) spending spree on a much lower 24%.
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Events in Iran and the private credit sector appear to have distracted from AI bubble concerns for the time being. Concerns about overspending on AI infrastructure have eased somewhat from last month’s high, while 51% of respondents said AI stocks were not in a bubble (versus 38% who said they were).
Respondents expect AI to have the biggest impact on corporate profits via higher productivity (27%), followed closely by commodity inflation via the effect of AI infrastructure (26%). Another 22% believe AI’s greatest impact will be on labour market deflation, via higher unemployment.
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