16th December 2015
Financials and Japan are fund firms’ top equity picks for 2016, according to a survey from the Investment Association.
The trade body’s inaugural Asset Allocation Poll, which gauged the opinion of investment chiefs collectively running £1.8 trillion of assets in the UK, also found fixed income investors are looking to Investment Grade for the best returns next year.
Over half of the firms that responded, at 56%, said Financials is the top equity sector to watch for in 2016. Materials is also tipped widely, with 22% of firms polled seeing it as a must-have sector for the next twelve months.
The analysis highlighted a healthy appetite for Japanese equities, with 45% of respondents naming it as the region expected to bear the most fruit next year.
There is an equal spread across other regions with the UK, Europe including UK, Europe excluding UK, Asia and ‘other’ sharing 11% each of investors’ focus in 2016.
The majority, at 56% of investment firms, are neutral on the outlook for smaller-sized equities next year, but within mid- and large-sized equities views are generally more positive. In those areas roughly 89% of firms who responded are neutral or positive.
Elsewhere, the ongoing rise in Socially Responsible Investing seen over the past few years is expected to power ahead in 2016, with over three quarters of respondents predicting continued growth in 2016.
As we prepare to enter another year of ultra-low interest rates, fixed income managers believe corporate bonds will offer the best returns to investors in 2016.
The majority of firms are tipping investment grade bonds – over high yield and government bonds – to outperform next year.
There is a broadly even split in terms of regional bond-market bias but 34% of firms polled expect Asia to provide healthy returns in the 12 months to come.
One of the biggest issues under scrutiny by investment managers today is the question of when the Bank of England – and other central banks – will finally raise interest rates above their current historic lows.
But some 89% of firms now expect a rate rise to arrive in either the second or third quarter of 2016, with just 11% expecting Governor Mark Carney to wait for next autumn or beyond.
Another major area of interest for investors going into 2016 is the performance of the US dollar, the Poll has found. Firms said their ability to react appropriately to any interest rate rise within their US and other global portfolios would be vital.