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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.
2017 for investment company investors
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.
"Japanese Smaller Companies and European Smaller Companies were the two top performing sectors in 2017 up an impressive 47% and 44% respectively"
– Annabel Brodie-Smith, AIC
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.
Manager views on the opportunities and concerns in 2018
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!
Communications Director, AIC
Investment company performance
Which sectors performed best in 2017?
Top performing investment company sectors over year-to-date - % share price total return to 30 November 2017. Source: Morningstar.
The political uncertainty that was a consistent feature of 2016 has continued this year with countries across Europe and Japan going to the polls; Brexit negotiations, which led to the recent announcement of a Brexit deal; worries over rising inflation and the first interest rate hike in ten years.
Over 2017 to the end November, overseas smaller companies sectors are leading the way with Japanese Smaller Companies the top performing sector, returning an impressive 47% and in second place is European Smaller Companies, up 44%. The Japan sector takes third place, up 34%, Country Specialists: Asia Pacific follows closely in fourth place, up 33% and UK Smaller Companies completes the top five, returning 27%.
It has been a good year for the closed-ended sector in share price total return terms, with the average investment company (ex VCTs) up 14%. This is up two percentage points on the sector’s average performance (12%) to the end of November 2016.
There has been a lot of demand for VCT shares so far in the 2017-18 tax year and in November the Treasury’s Patient Capital Review announced changes to the VCT investment rules. VCT performance over the year has been strong, up an average of 7% to the end of November 2017. This is up four percentage points (3%) on the same period in 2016.
The VCT AIM Quoted sector was the top performer of the year, up 18%, followed by the VCT Specialist: Environmental sector, which returned 6%.
Annabel Brodie-Smith, Communications Director, Association of Investment Companies said: “Investment companies have performed strongly in 2017 with the European and Japanese Smaller Companies sectors leading the way, having benefited from favourable election results. The overseas sectors have performed strongly due to healthy economic growth and sterling’s weakness. In contrast, Brexit uncertainty has been a headwind for the UK sectors.
“It’s interesting to look at the short-term winners but investors need to have a balanced portfolio and a long-term view. One year’s underperformers can be the next year’s star performers, showing how important it is not to react to short-term market movements. The investment company sector houses a broad variety of sectors, risk profiles and geographical exposure, and investors need to consider their investment objectives and risk profile when looking at potential investments. If investors have any concerns they should speak to a financial adviser.”
Top performing VCT sectors over the year-to-date - % share price total return to 30 November 2017. Source: Morningstar.
2017 portfolio review
By Ian Cowie
2017 portfolio review
By Ian Cowie
Investors should always be more interested in the future than the past - and that remains true, even when reviewing how our shares fared over the last year. So, while bearing in mind that the past is not necessarily a guide to the future, it is appropriate to report that one of my most successful investment trusts during 2017 focuses on new technology and the wealth-creating businesses of tomorrow.
Polar Capital Technology (PCT) – in which I first bought shares more than a decade ago - also provides an example of how investment trusts can enable individual investors to gain exposure to sectors where we have no specialist knowledge but may benefit from sharing the cost of professional stock selection. Strong performance by technology giants such as Facebook, Apple, Netflix and Google helped PCT deliver total returns of 44% during the 12 months to the time of writing (November 26).
Perhaps more surprisingly, this performance was precisely matched in 2017 by another specialist investment trust; Baillie Gifford Shin Nippon (BGS) where skilful management of Japanese smaller companies’ shares generated returns of 44% over the year and, according to independent statisticians Morningstar, 366% over five years. Once again, BGS demonstrates how investment trusts can give individual investors cost-effective and convenient access to markets about which we know little and, in this instance, trade while we are asleep.
By coincidence, joint third place in my investment trust portfolio during 2017 was also shared by two trusts, Fidelity China Special Situations (FCSS) and European Assets Trust (EAT); which both returned 36% over 12 months. However, I can take little credit for picking FCSS because I did not invest until the second half of the year. Meanwhile, my long-standing holding in EAT, a specialist in Continental European smaller companies, continues to provide good gains and a mouth-watering yield of 5.5%.
This trust’s performance also reminds me that medium to long-term investors should beware of being excessively influenced by short-term news events, such as Brexit negotiations. Despite serious doubts about how these talks will end, EAT’s wholesome income and gains show there are some good companies and profitable opportunities on the Continent.
"International diversification also helped reduce risk and maximise returns further afield in volatile economies that have suffered difficult periods in the recent past"
– Ian Cowie
International diversification also helped reduce risk and maximise returns further afield in volatile economies that have suffered difficult periods in the recent past. For example, BlackRock Emerging Europe (BEEP), which came fifth in my portfolio this year with 28%, and JPMorgan Indian (JII), which came sixth with 27%, both benefited from a recent return to favour for emerging markets.
Neither of these trusts yields much and so, for this income drawdown investor planning to fund retirement from stock market returns, it is important that JPMorgan Global Emerging Markets Income (JEMI) pays dividends equal to 3.6% of the share price. JEMI delivered total returns of 24% over the last 12 months to rank seventh in my investment trust portfolio.
Worldwide Healthcare Trust (WWH) and JPMorgan US Smaller Companies (JUSC) came eighth and ninth with returns of 23% and 20% respectively but negligible income. Fortunately, Henderson Far East Income (HFEL), in equal ninth position, helped fill the income shortfall with a 5.5% yield and total returns of 20%.
"Woodford Patient Capital came 13th and fell by 7%...However, this specialist in small, start-up businesses always emphasised the long view and so I intend to remain patient"
As if to demonstrate the risks of volatile markets, the 2017 laggards in my portfolio included BlackRock Latin American (BRLA), which ranked 11th with returns of 19%, and Schroder Oriental Income, which came 12th with 18%, and – as its name suggests – a yield of 3.6%. Worst of all, Woodford Patient Capital (WPCT) came 13th and fell by 7% - my only investment trust to lose money during 2017. However, this specialist in small, start-up businesses always emphasised the long view and so I intend to remain patient, despite initial disappointment.
The net effect across this global portfolio of 13 pooled funds was to deliver an unweighted average return of 25% with a yield of 1.9%.
"Professionally-managed and diversified exposure to the wealth-creating companies of tomorrow, wherever in the world they might happen to trade, offer reasons to hope for income and gains in future"
– Ian Cowie
There is, of course, no guarantee that 2018 will prove as profitable for investors as 2017. But professionally-managed and diversified exposure to the wealth-creating companies of tomorrow, wherever in the world they might happen to trade, offer reasons to hope for income and gains in future.
Ian Cowie is a columnist at The Sunday Times
AIC Chief Executive Ian Sayers on the high points of 2017 and the upcoming 150th anniversary of investment companies
As some commentators have noted, this must be one of the most unloved bull markets of all time. Whether it is Brexit, Trump, stretched valuations or North Korea, there is no shortage of issues that could keep you awake at night wondering whether we are at the top of a bubble that is about to burst.
Even if you are not so pessimistic about the future, there is little of the investor euphoria that often characterises such periods. Or, at least, that was what I thought until I saw the current surge in the price of a Bitcoin (whatever that is).
"The investment company sector continued to enjoy its day in the sun in 2017, with assets hitting record highs on a regular basis and the sector delivering strong positive returns over 1, 3, 5 and 10 years"
– Ian Sayers, AIC
However, for the time being, the investment company sector continued to enjoy its day in the sun in 2017, with assets hitting record highs on a regular basis and the sector delivering strong positive returns over 1, 3, 5 and 10 years and also outperforming mainstream markets and its open-ended competitors.
Fundraising, which slowed slightly in 2016, picked up again in 2017. Once again, this demand was driven by the sector’s unique advantages in delivering a higher and growing income. Most of this was also in asset classes such as infrastructure and property which are much more suited to the closed-ended structure of an investment company. I doubt the small hike in interest rates this year will do much to dampen demand for income in 2018.
However, in the spirit of looking backwards as well as forwards, we are busily making our plans to celebrate the 150th anniversary of the launch of the first ever investment company, Foreign & Colonial Investment Trust, in 1868.
Our themes for this celebration will be about long-term investing, stability and innovation. Though the world has changed almost beyond recognition in this time, it is amazing to look back and see the parallels that exist today.
After all, some of the earliest investment companies invested in new infrastructure projects in the emerging markets of their day (e.g. US railways). Today, the technologies are very different, as are the locations, but the desire to seek out the best returns wherever they may lie remains undiminished.
Of course, investment companies have had to ride out difficult times as well, such as the 1929 crash and Great Depression, and more recently the financial crisis.
But this longer-time perspective should provide reassurance that even the most severe market disruptions eventually pass and that those investors that kept their nerve and did not panic were well rewarded.
Which sort of brings me back to where I started. At these times, when we begin to wonder if and when the market might run out of steam, it is always prudent to remember why you started investing in the first place. And to remind yourself of the principles you said you would abide by, such as keeping a well-balanced portfolio and a long-term time horizon.
Keep these two in mind, and you will be well positioned for whatever 2018 has to hold.
Giving a gift for their future
Saving for children with investment companies
Giving a gift for their future
Christmas is fast approaching, with children writing their letters to Father Christmas and advent calendar windows being opened. Parents wanting to give a gift that lasts a bit longer may want to consider putting some money aside and contributing to an investment company Junior ISA or saving scheme, which could certainly pay-off in the future.
Over the past 18 years to the end of October 2017, a one-off £100 lump sum investment in the average investment company (excl. VCTs) would have grown to £481, whilst an annual £100 lump sum investment made every year (£1,800 invested in total) would have grown to a very impressive £6,197. For those wanting to be particularly generous and make a regular £50 monthly contribution, over 18 years to the end October 2017 (£10,800 invested in total) this would be worth a staggering £33,281 – a very generous present for the future.
Interestingly, the best performing sectors over 18 years are Sector Specialist: Biotechnology & Healthcare, up 1,198%; Global Emerging Markets, up 743%; European Smaller Companies, up 733%; Asia Pacific – Excluding Japan, up 583% and UK Smaller Companies, up 508%.
A gift for tomorrow
In a survey of the sandwich generation* – those aged 35-55 who have elderly parents and children – by the Association of Investment Companies (AIC), 46% of people said they were planning to contribute financially to support their child/children after they finished school. Results also showed that the average amount they were expecting to contribute was a substantial £40,088. So, investing regularly in an investment company saving scheme for children could certainly help parents meet their future financial contributions to their child.
"With so many financial demands placed being placed on our children today, it’s no wonder many parents and grandparents are thinking about how they can financially help and the sooner they start saving the better."
– Annabel Brodie-Smith, AIC
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies said: “Christmas is often referred to as the ‘season of giving’ and we all want to make our children’s Christmases magical by giving them a desired toy or the latest piece of technology. But as a parent, we know that many toys and presents can quickly get forgotten. With so many financial demands placed being placed on our children today, it’s no wonder many parents and grandparents are thinking about how they can financially help and the sooner they start saving the better.
“Parents might want to consider contributing to a Junior ISA or investment company saving scheme for their children which can help to build a nest egg that can make a real difference to their futures. Investment companies give investors access to the long-term potential of the stock market and have strong long-term performance. They invest in a range of investments on your behalf to spread the investment risk and there are a diverse selection of sectors and risk profiles to choose from. You can start saving for a child with relatively modest amounts and over time investment companies could be an excellent way to give your children a head start in life.”
Fund manager poll
Which regions and sectors do investment company managers pick for 2018?
Despite question marks remaining over Brexit and interest rates, the AIC's annual fund manager poll has found investment company mangers remain positive on the outlook for equities in 2018.
Equities remain the asset class investment company managers think is most likely to perform best in the coming year. However, managers are more cautious with 60% of managers thinking equities will perform best in 2018. This is down on the bullish 76% in last year’s poll. The majority (69%) think stock markets will rise next year but the remaining 31% say they don’t know if markets will rise.
Where are the opportunities?
"Europe and Emerging Markets are the top two regions managers think will produce the best stock market returns in 2018"
Europe and Emerging Markets are the top two regions managers think will produce the best stock market returns in 2018 and they present the most attractive opportunity on a five-year view. 30% of managers picked Europe as their region to produce the best stock market returns in 2018, while 23% chose Emerging Markets. The US, which was the most favoured region for stock market returns in last year’s survey, took third place (14%).
On a five-year view, there is more diversity from managers over which region presents the most attractive opportunity. Europe and Emerging Markets were the top two regions, each with 20%, while Asia Pacific ex Japan, UK and US were all next in line with 15%.
The outlook for 2018: Panel discussion with Scottish Mortgage, Witan and Standard Life Equity Income
When it came to which sectors managers thought would perform best in 2018, a quarter (25%) chose Software & Computer Services, while 21% chose Banks. Financial Services, which was the most favoured sector in last year’s survey, is the third most popular sector with 13%. On a five-year view, Software & Computer Services remained the most popular sector with 22%.
Optimistic in 2018
42% of managers said broad-based economic global growth across the world was the greatest cause for optimism next year. Perhaps explaining the diverse views of managers when it came to which regions they felt presented the most attractive opportunities. This was followed by 21% saying interest rates remaining low was their greatest cause for optimism, while technology driving economic growth and still finding opportunities in undervalued companies were joint third place, with 11%.
Causes for concern
The UK’s current situation regarding Brexit is the notable concern to managers in 2018, with 23% saying disappointing Brexit negotiations would be the biggest threat to equities in the coming 12-months. Interestingly, whilst 21% said interest rates remaining low was their greatest cause for optimism next year, 18% perceived rising interest rates as the biggest threat to equities in 2018.
Where will the FTSE 100 close 2018?
Last year, a third (33%) of managers thought the FTSE 100 would end 2017 between 7,000 and 7,500 and, so far, the market is on track to do so. Managers remain optimistic towards the FTSE 100 with 64% believing it will continue to grow in 2018 and end the year between 7,500 and 8,000. Whereas, 14% feel that the FTSE 100 will end 2018 as it started, between 7,000 and 7,500.
"Managers remain optimistic towards the FTSE 100 with 64% believing it will continue to grow in 2018"
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies said: “While managers are generally positive on the outlook for equities in 2018, it’s revealing that they are more cautious than last year. Last year’s concerns focussed on Brexit and it’s the same again this year, with Brexit being the core issue.
“However, it’s clear that managers are still broadly positive about equities, with Europe becoming their favoured region for 2018 and technology’s star rising to be the most popular sector next year. The breadth of manager views emphasises the importance of investors having a balanced portfolio and taking a long-term view. If investors have any doubts about their investments they should speak to a financial adviser.”
Fund manager comments
The challenge for investors
Tom Slater, Joint Manager of Scottish Mortgage said: “There is a huge challenge to public market investors who must simultaneously grapple with increased market concentration, existential questions for large proportions of existing market capitalisation and an environment where many of the most promising new companies are unlisted and outside the investable universe. This is presented by a combination of the following factors.
“Firstly, the dramatic changes set in motion by the internet giants from the West coast of America and the East coast of China are still widely under-appreciated despite the size and profile of the companies involved. Secondly, the impact of new business models underpinned by technological progress and driven by a small number of increasingly powerful companies will be felt across a much broader swathe of the economy over the next decade.”
“People should not worry too much about politics”
Andrew Bell, Chief Executive, Witan said: “Equities are essentially a means of gaining exposure to the fruits from global economic growth so provided that 2018 continues the unexpectedly good and widespread growth experienced in 2017 time should be on the side of those invested in equity markets. Continued growth in corporate earnings set beside a very gradual rise in interest rates (as central banks take some pressure off the monetary accelerator) should provide a following wind.
"People should not worry too much about politics – economic influences are usually more important"
– Andrew Bell, Witan
“People should not worry too much about politics – economic influences are usually more important for both economies and markets and globally these remain supportive of continued growth. However, geographic diversification is sensible to dilute the effect of rogue politics affecting a country or region and to take advantage of an increasingly broadly-based upswing. When the economic brakes are being applied, those without seatbelts (or airbags) are at risk of hitting the windscreen.
“The principal risks are a political misstep by a leading global actor leading to a general fall in confidence, or rapid rate increases, whether occasioned by inflation rising more than expected or a central bank misjudgement of the risks.
“Greater selectivity is warranted, given above-average valuation levels and the increased disruption of established sectors by technological change.”
Continuing to find opportunities at attractive valuations
Thomas Moore, Manager, Standard Life Equity Income Trust said: “We continue to identify many examples of companies that offer good dividend and capital growth prospects at attractive valuations. The UK political environment remains highly uncertain, which has resulted in a divergence in valuation between stocks and sectors, as investors have tended to spurn small and mid-cap stocks in favour of defensive large-cap stocks. Heightened short-term political uncertainty can result in a shift in investor focus away from corporate fundamentals, which has historically provided us with some of our most compelling valuation opportunities.
"We continue to identify superior dividend growth prospects within mid-cap and small-cap stocks"
– Thomas Moore, Standard Life Equity Income Trust
“We remain cautious on some of the traditional large-cap income sectors, such as Pharmaceuticals and Consumer Staples, where dividend growth is set to be constrained by weak growth and low levels of dividend cover. While we have recently found some valuation opportunities among large-cap sectors, notably Resources, we continue to identify superior dividend growth prospects within mid-cap and small-cap stocks.
“Throughout these uncertain times, we remain focused on identifying attractively valued stocks with the potential to surprise positively on the cash-flows and dividends that they report. Successfully anticipating positive change in a company’s fundamentals can act as the trigger for that company’s valuation to increase, driving the stock’s total return.”
“We are unlikely to have seen peak prices in equities”
Paul Niven, Manager, Foreign & Colonial Investment Trust said: “While there are inevitably risks which could derail the positive backdrop at this stage we do expect that 2018 will prove another positive year for equities. The global economy is exhibiting a broad based and synchronised upturn, and corporate earnings also appear relatively robust. This is helping to support equity valuations.
“Interest rate rises and potentially higher bond yields may create some challenges for risk appetite in 2018 but inflation, while expected to rise, should remain relatively benign. This means that central bank action is unlikely to lead to a pronounced rise in yields, which would puncture already lofty equity valuations.
“The equity bull market has, up to this point, been unloved by investors but, with the US economic expansion heading towards the longest in history, we are unlikely to have seen peak prices in equities. We are continuing to invest in a range of strategies and with the prospect of rising dispersion in markets opportunities for active management should continue to increase.”
"We are unlikely to have seen peak prices in equities"
– Paul Niven, Foreign & Colonial Investment Trust
Finding companies that benefit from digital disruption
Lucy MacDonald, Manager, Brunner Investment Trust said: “There is a lot to be mindful of in the hunt for growth and income as we move into 2018. With a Tax Bill moving through the US senate, and a post-Brexit trade deal yet to be debated, it is crucial that investors stay both active and selective in the countries and sectors they choose to invest in.
“For countries, Europe has delivered a number of positive surprises in 2017 and early indications point towards another good year ahead. It offers investors relative stability and a strong positive vision for growth.
“Sectors are all facing renewed levels of disruption from a number of sources, but technology is often a common theme. Finding those companies that offer an innovative solution to a genuine problem, or companies that take real action towards digital adoption, are set to benefit from this disruption.”
Global growth and signs of capital and infrastructure expenditure “an encouraging tail wind for markets”
David Goldman, Co-manager, BlackRock Income & Growth Trust said: “We meet with a vast number of company management teams every year and a key theme coming through in recent discussions is that, despite Brexit uncertainty, businesses are encouraged by the improvement in global growth and signs of capital and infrastructure expenditure starting to pick up from previously subdued levels. This is an encouraging tailwind for markets and is presenting several fantastic investment opportunities.
“We remain believers that over the longer-term earnings and cashflow growth tend to be the dominant driver of share prices and where equity markets fail to recognise that, corporate buyers have the potential to exploit the opportunity. With a combination of sterling movements and the availability of cheap debt, we believe that M&A activity will remain a theme throughout the course of 2018.”
Uncertain times will increase investors’ focus on long term investment
Dion Di Miceli, Head of Investment Companies, Gravis Capital Management said: “We are living through turbulent and uncertain times with a convergence of macroeconomic events likely to create greater levels of equity market uncertainty over the coming years. At Gravis, we believe this will increase investors’ focus on investment ideas for the long run that are supported by non-correlated, long-term investments providing stable, predictable returns through market cycles. The investment company structure offers investors the optimal vehicle for accessing returns from such assets.”
Active stock picking returns
Graham Bird, Manager, Gresham House Strategic said: “2018 should see a return to active stock picking as the momentum trade which has driven stock market performance over the last five years stalls due to high valuations. The opportunities will come through valuation anomalies that have arisen and I expect investors to return to fundamentals, focusing on metrics including traditional value characteristics and cashflow return on capital.”
Outlook for equities remains strong
"The US technology climate remains favourable and despite its recent strong run we believe the fundamentals of the sector have more to give"
– Walter Price, Allianz Technology
Walter Price, Manager, Allianz Technology said: “As 2018 approaches, the outlook for equities, and specifically tech equities, remains strong. We are seeing robust economic growth around the globe and technology is pivotal in driving a fourth industrial revolution. The US technology climate remains favourable and despite its recent strong run we believe the fundamentals of the sector have more to give.
“New technologies are changing the way we work and driving efficiency and productivity growth across a broad range of sectors. Whilst there are dangers posed by a slowing Chinese economy, it is our belief that those technology companies who are truly innovative and offer a real benefit to users will continue to benefit from corporate investment, and continue to flourish.”
A ‘goldilocks’ scenario for global equities
Jon Forster, Co-manager, Impax Environmental Markets plc said: “This is a ‘goldilocks’ scenario for global equities and in 2018, the next peak in economic data is possible. We currently see more attractive valuations outside the US equity markets.”
Opportunities in UK smaller companies despite Brexit uncertainty
David Stevenson, Manager, Amati Global Investors, managers of Amati VCT and Amati VCT 2 said: “The UK economy has shifted down a gear in 2017, and much now depends on the Brexit process. The near-term outlook appears increasingly out of step with a positive global growth environment.
“We continue to believe, however, that the best strategy for investors is to back dynamic businesses offering durable growth based on a combination of technology, intellectual property and deep domain expertise.
“UK quoted smaller companies continue to offer a wealth of opportunities in this regard.”
In the midst of a cyclical upturn in the economy
"While market sentiment has clearly turned more positive to the risk-reward balance around the opportunities in the Chinese market, we still find good value relative to the long-term growth potential"
– Dale Nicholls, Fidelity China Special Situations
Dale Nicholls, Manager, Fidelity China Special Situations said: “We are currently in the midst of a clear cyclical upturn in the economy.
“Supply-side reform in areas like steel and cement has helped lift pricing across a range of commodities.
“On the policy front, there is increasing rhetoric focused on the risks associated with the build-up of credit we have seen in the economy. This focus could become stronger post recent leadership changes – all positive in addressing our major concern for the long-term health of the economy.
“The environment remains positive for ongoing growth in consumption as part of the natural expansion of the middle-class, a key investment theme for the portfolio. While market sentiment has clearly turned more positive to the risk-reward balance around the opportunities in the Chinese market, we still find good value relative to the long-term growth potential.”