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2016 Review - A year to remember for investors2016 Review: Asset Allocation views
As a conclusion to the review of 2016 Investment Adviser asked multi-asset experts for their views on how key asset classes performed over the course of the year.
Given it has been such an eventful period, three experts provided their opinions on how equities, fixed income and property have fared in the past 12 months.
Steven Andrew, Manager of the M&G Episode Income fund
Equities
Global equities saw declines early in 2016. But from mid-February, investor sentiment grew more confident and equities bounced back, albeit with short-term volatility. This leaves equities in aggregate around neutrally valued, but with regional- and sector-level opportunities.
Fixed income
Bond markets initially benefited from a flight to safety. Government bond yields dipped during the summer but have risen, certainly in terms of US Treasuries, in recent weeks. Year to date, credit has outperformed government bonds, led by high-yield credit.
Property
Even before the UK’s referendum, capital and rental value growth was well down on the same period a year earlier. Following the vote to leave, capital values fell by around 4 per cent. Property at these valuations offers a good source of diversification in a multi-asset fund.
Alistair Campbell, Financial analyst, Sarasin & Partners
Equities
Equity markets have enjoyed a strong year of returns, but figures do not convey the year investors have endured. Concerns have flitted from a Chinese slowdown to the Brexit vote and a Trump presidency. In each case, we have seen a market sell-off followed by a rapid recovery.
Fixed income
Bond markets rallied during the first nine months. Inflation and growth expectations stayed down, which saw the UK 10-year gilt yield hit a low of 0.5 per cent in August. September saw a turnaround in sentiment as investors eyed fiscal stimulus and the potential pickup in growth.
Property
Property was uninspiring when compared to past years. The Brexit vote saw outflows from daily dealing UK property funds, prompting many to close or introduce exit charges. It provided a useful example of using appropriate fund structures to hold illiquid assets.
Thomas Wells, Multi-asset fund manager, Aviva Investors
Equities
Global equities look poised to deliver positive returns for investors for a fifth successive year. The UK market has been among the strongest, aided by the plunge in the value of the pound, while emerging markets have also risen as investors seek higher prospective returns.
Fixed income
Most government bond markets also appear set to deliver positive returns for investors as central banks keep monetary policy loose. That has fuelled an ongoing rise in corporate bond prices as investors are once again lured, by record-low interest rates, towards riskier types of debt.
Property
UK real estate is set to deliver a small positive return to investors in 2016 as regular rental income outweighs the impact of a decline in capital values, which have fallen by around 3 per cent since the EU referendum result, particularly affecting central London offices.
