HSBC has surveyed 10 fund management houses with total assets representing close to 20% of all funds under management globally û or $4.85 trillion out of $25.82 trillion û about their latest views on the first quarter of 2008 and their combined fund flows over the fourth quarter of 2007.

Participating managers included AllianceBerstein, Allianz Global Investors, Baring Asset Management, Blackrock Merrill Lynch, Fidelity, Franklin Templeton, HSBC Investments, Invesco, JF and Schroders.

Up to 62% of these houses reported an overweight view on cash, up from 25% in the last quarter. The survey has also found that 38% of their portfolios have an underweight view on equities, with another 50% holding underweight positions in bonds. Across these asset classes, fund managers are mostly overweighing Asia-Pacific ex-Japan and emerging market stocks. A significant strong hold is in high yield and emerging market bonds.

Asset raising had not proved to be as difficult as originally expected, as these managers still reported a 2% growth in their total assets under management, attracting $94 billion in new funds between the third quarter of 2007 and the year end.

A total of $77 million out of the $94 billion, or 82%, of the new money went directly into money market funds. Fund-linked instruments have also proved to be popular, with the managers reporting $23 billion of inflows into the sector. Reflecting the new conservative attitude among investors since the peak of the subprime crisis, bond funds and balanced funds respectively reported a $5 billion and $3 billion rise, while equity funds dropped by 15% - or a total of $14 billion.

Despite money market fundsÆ new found popularity, traditional vanilla asset classes are still a mainstay. 40% of all assets managed by the group remains in equity products and 24% in bond funds. Balanced funds and fund-linked notes represent another 11% and 7%, while an 18% allocation is in money market funds.

HSBC data shows net fund flows into Asia Pacific ex-Japan equities has been the strongest at 14.3%. Japan equities and European equities also reported minor gains of 1.9% and 0.4% respectively. Nearly all other country and regional equity funds reported losses: global equities were off 1.8%, US equities off 2.0%, and global emerging markets ex-Asia off 7.2%.

Aside from European and Asian equities, positive fund flows were recorded across all sectors in the bond fund market, except for US bond funds, which dropped by 1.4%. Global bond funds were up by 5.4 %, European and UK bonds up 2.4%, while high yield and emerging market bonds increased by 4.4%.

Bruno Lee, head of wealth management for personal financial services at HSBC, notes the change in investor appetite will reshape the bankÆs product selection strategy for the remainder of the year. He says HSBC will focus on bond fund offerings and more conservative products, such as guaranteed funds or equity-linked notes.

He adds HSBCÆs product launching schedule will not be slowed down for the year û more products will gradually come into the market. Theme-based funds, such as commodities, agricultural and Asian market products have rewarded the bank with significant successes in the first and second quarter this year, and may well continue to be a focus for the rest of 2008, he says.