Bullishness has risen among fund managers over the past three months despite them worrying about risks in private credit markets and artificial intelligence valuations.
Quilter's Investor Trends survey found risk appetite scores increased from 5.4 to 5.9 on a scale of one to 10 over the quarter. The survey asked fund managers to rank their current risk appetite on a six-to-nine-month basis.
Some 65% of fund managers identified private credit market stress as the most underappreciated risk. Nearly half saw overvaluation in tech stocks and the AI trade as a key concern.
Recent failures in the private credit market included First Brands, a US auto parts company that went bankrupt amid alleged fraud. Tricolor, a US sub-prime auto lender, followed and exposed large financial institutions to losses.
One fund manager noted “an element of ‘crises fatigue’ from investors in the face of global conflict, political shocks and policy swings”. Markets have shrugged off events that would historically have caused volatility, they said.
Lindsay James, investment strategist at Quilter, said: “It is interesting to see that despite some well publicised and worrying risks developing in markets, including the recent falls, fund managers are effectively shrugging their shoulders and becoming more risk tolerant.
“It is clear that professional investors continue to look at the wider corporate picture and sparks of optimism remain that markets could grind higher in 2026."
James noted that fund managers remain “cognisant” of credit market risks, with the First Brands and Tricolor failures sending “shockwaves” through financial institutions. Wider contagion would trigger further market volatility, she said.
“It is perhaps this backdrop that sees investors be comfortable with the current level of the price of gold. Demand from central banks has helped to sustain the rise to date and despite a recent correction fund managers again appear comfortable with current valuations,” she added.
“If we do start to see additional volatility in other areas of the market, investors may just be attracted to gold's shining qualities once again.”
Gold rose from just over $2,500 at the start of 2025 to nearly $4,400 before correcting to around $4,000. Some 81% of fund managers expect gold to rise by at least 5% over the next six months. Almost one in five expect it to rise by over 10% in the same period. Only 12% think it will fall from current levels.