Europe has come out top as the most favoured investment region in the Association of Investment Companies’ annual poll of member investment company fund managers.
The region swung a 39 per cent vote in the poll, which took responses from investment company fund managers representing over a quarter of the industry.
Europe was followed by the United States at 22 per cent and Asia Pacific excluding Japan at 17 per cent. Some 91 per cent of managers said they expect markets in general to rise in 2015.
However, managers did highlight potential risks to equities for next year, with 41 per cent thinking the weakening of developed economies is the greatest threat, whilst deflation was a concern for 8 per cent of managers.
This was followed by UK election worries, another recession and Russia/Ukraine difficulties, all at 9 per cent.
The greatest cause for optimism, cited by 30 per cent of managers, was the expectation that interest rates would remain low next year.
Sixty-one per cent of managers say that investors’ demand for income is influencing their investment policies.
A total of 74 per cent of managers expect equities to outperform other assets in 2015. Nine per cent expect commodities and natural resources to outperform next year, another 9 per cent favoured commercial property and 4 per cent thought “cash will be king”.
Elsewhere, results from the survey showed that managers are optimistic about the opportunities the April pension changes will create. Thirty-six per cent thought they present an opportunity for the investment company sector and 55 per cent said they will present some opportunities.
Lucy MacDonald, manager of the Brunner Investment Trust, said: “The investment environment we have been operating in for the last five years has been favourable, with strong returns and low volatility, due to abundant liquidity, recovering corporate earnings and favourable starting valuations.
“Corporate earnings are growing at a more normal pace after the sharp recovery phase, with debt deleveraging still restraining nominal demand. Valuations of equities, while still attractive against other assets are above historic averages, particularly in the US.
She added: “For all these reasons, we believe nominal returns in equity markets will be more muted in the next three years; hence the importance of active management and strong stock selection to drive some additional gains.”
ruth.gillbe@ft.com
