Plenty of Manager Optimism – AIC

by | Dec 16, 2014

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Not even an 11% market correction has managed to knock the optimism out of Britain’s investment company managers, according to the latest annual survey by the Association of Investment Companies (AIC), which was released today. A giddying 91% of the respondents told the AIC that they expect markets in general to rise in 2015 – with 39% putting their biggest hopes on Europe, 22% looking toward the United States and 17% toward Japan.

 

Confidence in the Global Scenario

The AIC’s survey covered investment company fund managers who collectively manage £33bn, and who represent 27% of the total sector by assets. Some 74% of the respondents said that they expect equities to outperform other assets in 2015. But a courageous 9% expect commodities and natural resources to perform best next year, after this year’s dismal showing; and 9% favour commercial property. Only 4% are banking on cash.

Some 30% of the respondents said that they expect interest rates to remain low next year, which they said was far and away the greatest cause for optimism. But 13% said they were cheered by the prospect of an increase in company earnings, and another 9% cited the falling price of oil; 9% specified the prospect of strong balance sheets; and (you guessed it) another 9% expressed confidence in continued government intervention in the macro economy.

 

And the Footsie?

And so to the crunch question. Where do the managers think we’ll be at the end of 2015?

47% of the respondents told the AIC that the FTSE 100 will close 2015 at somewhere between 6,500 and 7,000, which would be between 5% and 13% more than today’s levels. (7,000 would be an all-time high.) And another 37% are pitching their estimates between 7,000 and 7,500, which would take us closer to a 21% gain on today’s levels.

Impressively, a further 11% say they expect the FTSE 100 to end 2015 above 7,500. But, perhaps sensibly, another 17% of respondents preferred not to offer an opinion

 


 

Where do you think markets will close at the end of 2015?

4000 – 4500 4500 – 5000 5000 – 5500 5500 – 6000 6000 – 6500 6500 – 7000 7000 – 7500 Above 7,500
0% 0% 0% 0% 5% 47% 37% 11%

Which sectors to back in 2015? The respondents were divided, with financials, manufacturing, resources (including oil) and smaller companies all getting broadly similar support. But they all seemed to be agreed that blue chips are not the way to go – only 4% voted for the big ones, compared with 24% last year.

 

The Pensions Opportunity

 Managers say they are optimistic about the opportunities the forthcoming pension changes will create – 36% strongly think this presents an opportunity for the investment company sector and 55% think it will present some opportunities.  Looking at whether the post RDR environment has had a positive effect on the investment company sector, 77% believe it has had some impact, and 9% strongly believe this has been a positive for the sector.

 “It’s been a good year for the investment company sector,” said Annabel Brodie-Smith, AIC Communications Director,and it’s encouraging to see managers still optimistic, despite the strong gains of recent years. Income continues to be the dominant theme, with managers clearly taking the view that interest rates are likely to remain low, and demand for yield should continue to support equities.”

“Whilst managers are generally positive, clearly there are some concerns on the horizon – not least the weakening of developed economies.  So, as ever, investors need to take a long-term view and have a balanced, diversified portfolio, to prepare for times ahead. And whilst it’s interesting to gauge manager views on the year ahead, these views do not come with any certainty – no managers that we have spoken to can claim to have a crystal ball.”

Indeed not. Perhaps the spirits will prove more reliable? Pass the brandy, would you?

 

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