It turns out that us financial journalists are ‘on trend’ when it comes to predicting the best performing asset classes for the year ahead.
According to Investec Asset Management’s first ever Journalists’ Investment Survey released this week, equities topped a poll of which asset classes are likely to be the high achievers in 2013.
In particular, international financial hacks favoured emerging market equities with 38% of the vote, closely followed by developed market equities after 27% of respondents put it in second position.
Meanwhile, when it comes to the slackers more than half of journalists believed that developed market bonds will be the worst performing asset class in the next 12 months.
But it was not all doom-and-gloom for fixed income as emerging market debt claimed third place for a quarter of respondents.
So, journalists are backing emerging markets as a jurisdiction and the equity asset class to fare well in the year ahead, while bonds are likely to suffer.
This ties in nicely with the perception coming out of press releases and briefings which also suggest equities will rally this year on the back of increased appetite and the search for yield. It seems following such a bumper year in 2012, fuelled largely by quantitative easing, bonds might have had their peak. Furthermore, many believe we could see the onset of the ‘great rotation’ out of safe haven low-yielding assets back into riskier securities, such as equities.
The retail space already seems to be one step ahead. Figures by the Investment Management Association this week revealed equity funds outsold fixed income in each of the last four months of 2012, although it was no surprise to see that overall fixed income was the best selling asset class in 2012 with net retail sales of £5.6bn, compared to £3.4bn for equity.
Another survey published this week helpfully highlighted the trend until now among UK pension funds reducing equity allocations. Allocations fell from 61% in 2002 to 45% in 2012, yet the survey – Towers Watson’s Global Pension Assets study – also revealed bond allocations for the seven largest pension markets have decreased by 7% in aggregate during the past 18 years (40% to 33%).
But conversations I have had with fund managers this week suggest the fixed income story is not over in all cases. Alternative forms of credit, such as asset-backed securities, will come onto funds’ radars this year owing to their solid credit quality, high risk-adjusted returns, liquidity and interest rate protection.
My own personal, ahem, expertise was not called upon for the Investec survey but I think I too would have opted for the comeback of equities. Only time will tell if we are right
Comments