IFAs and fund managers give 2008 predictions
The Asia Pacific region excluding Japan has been tipped at the best performing sector in 2008 by fund managers.
A joint survey of IFAs and fund managers, carried out by The Association of Investment Companies and Unbiased.co.uk, found that both groups are optimistic about the prospects for 2008 despite forecasting that the credit crunch will continue beyond the new year. And while fund managers tip the Asia Pacific region, IFAs believe emerging markets will be the best performers next year.
Despite the ongoing credit crunch and diminishing consumer spending proving to be causes of concern for fund managers, reasons to look on the bright side include attractive valuations, falling interest rates and better than expected global growth, especially in Asia.
Fund manager Jeremy Tigue, manager of Foreign & Colonial Investment Trust, says: “While the current credit crunch is a major problem for markets it is starting to produce some mouth watering opportunities for investors who can look ahead to the end of 2008.”
The expectations of how the FTSE-All Share will perform in 2008 were measured, with 44% of fund managers and 45% of IFAs predicting it will close next year at between 6,500 and 7,000 points.
However, an optimistic 14% of IFAs and 17% of fund managers forecast it climbing to between 7,000 and 7,500 points while a pessimistic 11% of fund managers and 8% of IFAs think it will end 2008 at 5,500 and 6,000 points.
Annabel Brodie-Smith, communications director at the Association of Investment Companies, says: “There are a number of investment company fund managers who are finding many opportunities amidst the current backdrop, with some taking the view that the pessimism has been overdone. While it’s interesting to gauge the views of investment professionals, markets are impossible to predict and one year’s best performing sector can sometimes become the following year’s worst performer.
"So it’s important to take a long-term view, ensure you have a balanced portfolio and not to get carried away by the latest ‘hot’ sector.”
David Elms, chief executive of Unbiased.co.uk, adds: “It is great to see that IFAs and fund managers still remain positive about the market outlook for 2008, despite the recent stockmarket movements. However, regardless of market fluctuations, consumers should ensure that they have their portfolio reviewed by an independent financial adviser on a regular basis to make sure their investment goals are being met.”
Investment trusts are companies that invest money in other companies and whose shares are listed on the London Stock Exchange. As with unit trusts, private investors buying shares in an investment trust are buying into a diversified portfolio of assets (to reduce risk), which is managed by a professional fund manager. Investment trusts differ from unit trusts in two important ways: they are listed on the stockmarket and so are owned by their shareholders and are closed-ended funds with a finite number of shares in issue. This means the share price of investment trusts might not reflect the true value of the assets in the company (known as the net asset value, or NAV) and if the NAV value of a share is £1 and the share price in the market is 90p, the trust is said to be running a discount of 10% to NAV. But this means the investor is paying 90p to gain exposure to £1 of assets. Investment trusts can also borrow money and use this money to buy investments. This is known as gearing and a geared trust is thought to be more of an investment risk than an ungeared one.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.