Fund manager sentiment on almost all asset classes and sectors weakened this quarter, especially for Australian small caps and real estate investment trusts, a Russell Investments survey has found.
Sentiment towards the listed property market tumbled in March, with 61 per cent of fund managers surveyed now doubtful of future prospects.
The sector lost two thirds of its value over the last 12 months and only 26 per cent of managers are willing to venture in at this stage.
Only 33 per cent of fund managers surveyed are bullish on Australian small caps, while 54 per cent are bearish.
Optimism was strongest for the healthcare sector, with 56 per cent of fund managers expressing confidence towards the sector versus 28 per cent who are bearish.
But the outlook for consumer staples was more mixed. The sector now appears branded with the "expensive defensive" tag and managers are divided over its future prospects, with 30 per cent bearish towards the sector compared to 36 per cent who are bullish.
Less than 25 per cent of fund managers see the consumer discretionary sector rebounding in 2009, and just over 50 per cent expect declines.
However, not all cyclicals are out of favour.
"Energy is benefiting from the recovery in the oil price, which at the time of this survey had rebounded 25 per cent from its January lows. Only one in four managers are now bearish on the sector while nearly half are bullish," the survey said.
Approximately half of the surveyed managers expect Australian bonds to decline in value from the recent return highs and nearly two thirds are bearish on cash.
