Investec’s David Aird said investing in ‘quality’ self-help companies should be the priority next year.
Mr Aird, who is the managing director of Investec Asset Management’s UK client group, predicts economic growth to continue to be muted for the “foreseeable future”.
He therefore said Investec will largely be focused on ‘quality’ companies both in the UK and globally, with particular emphasis on what he described as “self-help” firms.
The Investec director defined these quality self-help companies as being able to generate their own growth through their businesses and products, as well as having good management and a healthy cash flow.
Mr Aird also expects to continue to see value stocks being re-rated upwards going into next year, as investors acknowledge their improving fundamentals.
“Having been an investment style becalmed ever since the financial crisis, dedicated value investors, such as Investec’s Alastair Mundy, should have their patience and their contrarian approach rewarded,” he said.
The Investec director said next year presents a number of “diverse challenges”, pointing to low interest rates, rising bond yields, and the search for income.
He also said one challenge investment firms will face next year is the slow demise of defined benefit pension schemes, as occupational defined contribution schemes continue to rise.
“The flows into high quality workplace default funds will only increase and advisers will be well-placed to engage with scheme members as a new source of business.”
Mr Aird said the Investec Diversified Growth fund is increasingly becoming the default solution in workplace pension schemes, adding: “Multi-asset funds therefore remains a key element within our business plans for 2017.”
Looking back at 2016, Mr Aird said the year has been marked by weak economic growth and market volatility, which he said both tested asset managers’ resolve and unsettled clients.
“In an environment of greater scrutiny by our regulators, increased transparency and ongoing debate about value for money, active managers have a significant part to play in providing clients with high quality solutions for their investment needs.”
He also said demand for income from his clients has “never been more acute”.
“In a ‘lower for longer’ world, the contribution active returns can make towards our clients’ total return, become ever more important.”
Mr Aird said jittery markets and poorly constructed indices all provide opportunities for active managers to excel.
“Skill in producing active returns, asset allocation decisions, delivering outcome focused solutions or providing clients with access to exotic beta are all competences that are in short supply and can be charged at a fair price.”