By Annabel Brodie-Smith
As the year draws to a close, this month we are looking back at what 2017 meant for investment company investors and looking ahead to see what fund managers think 2018 may have in store for us.
The never-ending political uncertainty continued in 2017, with the UK’s snap election providing an unexpected result, the ups and downs of the Brexit process continuing and key elections in Europe and Japan taking place. Markets and investment companies have generally thrived on these uncertainties, with the average investment company up 14% to the end of November 2017. Japanese Smaller Companies and European Smaller Companies were the two top performing sectors in 2017 up an impressive 47% and 44% respectively. For more on this read our article on the best performing sectors.
Ian Cowie, our investment guru who writes each week for The Sunday Times, takes a look at how his investment companies have performed this year. It makes happy reading with his most successful investment companies focusing on “new technology and the wealth creating businesses of tomorrow” and his portfolio of 13 investment companies delivered an average return of 25% this year.
In an end of year blog, the AIC’s Ian Sayers reflects on the encouraging year it has been with investment company assets reaching record levels and the sector outperforming mainstream markets. At a time when investors may be wondering whether markets are running out of steam, Ian also reminds us why it’s good to remember the fundamentals.
At this time of year, children around the world are excitedly waiting for Christmas, hoping Santa has brought them the present of their dreams on Christmas day. For those that would like to give a gift that lasts a bit longer, an investment in an investment company junior ISA or Children’s Saving Scheme could be something to consider. In our article, Giving a gift for their future, we look at how a £100 investment in the average investment company 18 years ago would be worth an impressive £481 today.
Ian Cowie of course is right when he emphasises that, “investors should always be more interested in the future than the past”. We don’t have a crystal ball to see what’s coming next and the only thing that’s certain is that the past is not necessarily a guide to the future. Investors need a balanced portfolio and a long-term approach to investing.
Bearing all this in mind, you must watch the below video where I talk to managers of two of the biggest investment companies, Tom Slater, joint manager of Scottish Mortgage and Andrew Bell, chief executive of Witan both from the Global sector and Thomas Moore who manages Standard Life Equity Income from the UK Equity Income sector. We discuss the managers’ views on their causes for optimism and concern next year, what’s important for their investment company, as well as finding out more on the winning regions, the valuations of technology stocks and the opportunities created by political uncertainty in the UK.
Again, bearing in mind JK Galbraith’s quote, “the only function of economic forecasting is to make astrology look respectable”, the AIC’s fund manager poll is worth reading. Investment company managers remain positive about 2018 but are more cautious than last year, with 60% thinking equities will perform best in 2018, down on the bullish 76%.
The outlook for 2018: Panel discussion with Scottish Mortgage, Witan and Standard Life Equity Income
Europe and Emerging Markets were the two regions managers think will produce the best returns in 2018 and Software & Computer Services was their favoured sector. They were optimistic about broad-based economic growth across the world and Brexit yet again remained their biggest threat to equities. Interest rate movements, interestingly, were both a cause for optimism and concern for managers.
One certainty that 2018 will bring is the 150th anniversary of investment companies. Foreign & Colonial Investment Trust was launched in March 1868 and we are looking forward to celebrating the many achievements of the investment company industry over the last 150 years in 2018.
All that remains is for me to wish you a Merry Christmas and a Happy New Year!
Annabel Brodie-Smith Communications Director, AIC