You are here: Home > Media > Press releases > INVESTMENT TRUST FUND MANAGER AND IFA 2004 MARKET

• Print Page

INVESTMENT TRUST FUND MANAGER AND IFA 2004 MARKET

  IFAP / AITC JOINT POLL

• IFAs more optimistic than investment trust fund managers on potential of FTSE 100
• Far East sectors predicted to be the best performing geographical area in 2004
• Appetite for equity exposure has increased over the last few months
• Are investment trust fund managers planning to increase their borrowing in 2004?

Investment predictions and views for 2004 have been collated by the Association of Investment Trust Companies (AITC) amongst 30 investment trust fund managers representing 10.5 billion assets under management - a fifth of the industry - and through a poll undertaken by IFA Promotion (IFAP) amongst all its member IFAs¹. 

The research shows some significant parallels between the views of both groups.  The majority of investment trust fund managers and IFAs were cautiously optimistic, predicting that the FTSE 100 will close between 4500 5000 by the end of 2004.  In addition, both groups tip the Far East and Emerging Markets as top-performing sectors next year.

However, there are some significant differences in views, with IFAs proving more optimistic than fund managers.  Some 20% of IFAs expect the FTSE 100 to close between 5000 5500 compared to just 3% of fund managers.  In addition, there are some differences regarding their predictions for the top performing UK sectors.   Nearly a third (28%) of investment trust fund managers tipped blue chips, compared to just 9% of IFAs.

But despite this difference both fund managers and IFAs tipped a number of higher risk UK sectors to outperform.  In addition, none of the Global investment trust managers expected either the UK or the US to be the best performing country in 2004 whereas 19% of IFAs expected the UK to be the best performing country and a further 13% of IFAs favoured the US.

UK

When asked where the FTSE 100 would close at the end of 2004, the majority of fund managers and IFAs were in agreement.   Some 59% of investment trust fund managers and 50% of IFAs expect the FTSE 100 to close around 4500 5000, suggesting a continuing recovery next year. This compared to only 13% of private investors² who expect the FTSE 100 in 2004 to close around this level, with the majority opting for 4000 4500. 

Whilst the majority of fund managers and IFAs agreed, there were some clear differences and investment trust fund managers were much more cautious about the prospects for 2004 than IFAs.  A bullish fifth of IFAs expect the FTSE to close between 5000 5500 at the end of 2004, compared to just 3% of investment trust fund managers.  Nearly a quarter (24%) of investment trust fund managers expect the FTSE to close around 4000 4500 compared to 19% of IFAs, whilst 14% of investment trust fund managers tipped the FTSE to close between 3500 4000, compared to just 7% of IFAs.

	Below 3000	3000-3500	3500-4000	4000-4500	4500-5000	5000-5500	Above 5500	Prefer not to speculate
Fund Managers1	0%	0%	14%	24%	59%	3%	0%	0%
IFAs 1	0%	3%	7%	19%	50%	20%	1%	0%
Private2 investors	5%	10%	13%	25%	13%	4%	3%	27%

 

Which sectors will outperform in the UK?

This cautious stance from investment trust fund managers could explain why 28% tipped blue chips to be the best performing sector in the UK in 2004 compared to just 9% of IFAs.  However, the majority of investment trust fund managers were still keen to tip sectors at the higher end of the risk scale. Some 24% favoured financials, 17% favoured smaller companies, a further 17% favoured utilities and 14% favoured media.  IFAs were also keen on smaller companies (22%), but more were optimistic about special situations (35%).  Only 7% of investment trust fund managers expected technology stocks to produce spectacular gains in 2004, a point which IFAs appeared to agree on (8%). 

Overseas

When asked which geographical area would perform best in 2004, both Global Growth fund managers (UK fund managers were not asked this question) and IFAs overwhelmingly voted in favour of the Far East and Emerging Markets sectors (see table below).  However, investment trust fund managers were much more keen on Japan than IFAs, with 19% expecting it to be the best performing country in 2004 compared to just 6% of IFAs.  Meanwhile, no Global Growth investment trust fund manager expected either the UK or the US to be the best performing country in 2004, whereas 19% of IFAs expected the UK to be the best performing country and a further 13% of IFAs favoured the US.

 

	Far East (Inc Japan)	Far East (Ex Japan)	Japan	Emerging Markets	UK	US	Global	Europe	Other
Global Fund Managers3	19%	19%	19%	31%	0%	0%	6%	0%	6%
IFAs1	10%	19%	6%	21%	19%	13%	3%	7%	2%

 

To gear or not to gear?

Although most investment trust fund managers did not expect to see the FTSE 100 go beyond the 5000 mark in 2004, few plan to reduce their equity exposure in favour of cash and fixed interest (10%), with 80% planning to maintain their current levels.  A further 10% plan to increase their equity exposure.  The majority of investment trust fund managers (67%) plan to neither increase or decrease their current gearing (borrowing) levels in 2004, whilst 13% plan to increase their gearing levels and 20% plan to reduce their gearing levels in 2004.  

Investor appetite for risk

Some 62% of IFAs said their clients appetite for risk had increased over the last few months, 25% said they had stayed the same, whilst 13% said that their clients appetite for risk had decreased. 

Interest rates

Not surprisingly, a massive 93% of investment trust fund managers expect UK interest rates to go up in 2004, although they were divided in terms of the impact this could have on the stockmarket.  Of those expecting an interest rate hike in 2004, 44% thought this would be bad news for equities, whilst 19% thought it would be good news.

 

David Elms, Chief Executive, IFA Promotion said: The polls demonstrate that there is lots of optimism concerning the investment market and consumer confidence is returning.

 

Independent financial advice is key for consumers making investment decisions and IFAs clearly play a major role in the sale of investment products.  We are pleased to see so many IFAs have taken part in this poll and have such strong views about the forthcoming ISA season.

 

Annabel Brodie-Smith, Communications Director, Association of Investment Trust Companies (AITC) said: It is interesting to see that whilst investment trust fund managers are taking a rather cautious stance on prospects for the FTSE 100 next year, many are still tipping UK sectors at the higher-risk end of the scale.  On a global perspective, in 2004 the Far East sectors are a firm favourite.

 

Whilst it is interesting to speculate, of course no one can be sure how the market will react next year. 

Investors need to concentrate on a well-balanced portfolio for the long-term, rather than attempting to rely on certain countries, sectors or indices to do well in the short-term. In this context, investment trusts are worth considering.  By investing in a variety of companies on your behalf, they can spread investment risk across a variety of sectors, risk profiles or countries.  Available from 25 per month or 250 lump sum, they can be an ideal way of investing over the longer term.

Fund Manager Views for 2004:

John Pennink, Manager, British Empire Securities & General Trust, a Global Growth investment trust said: Stronger global GDP growth and rising earnings should underpin a positive environment for equities in the first half of 2004. Risks to this optimistic scenario include the gradual decline in the US Dollar turning into a rout and rising interest rates. We continue to find opportunities for our undervalued asset style in Japan, emerging markets and commodity plays."

 

James Anderson, Manager of Scottish Mortgage Investment Trust, a Global Growth investment trust said: We are still relatively optimistic about the outlook for global markets generally. Low interest rates and expansionary policies seem to have pushed the US economy forward and we are seeing very strong figures being reported there. However, the real engine of global growth has been, and is likely to continue to be, China and other emerging markets. I am still looking to increase my exposure to companies which will benefit from this major shift in the balance of the global economy. There is now considerable wealth in China and we are particularly attracted to a number of luxury goods exporters and commodity producers.

 

For details of local IFAs, call IFA Promotions hotline on 0800 085 3250 or

visit Seeking Financial Advice at www.aitc.co.uk

- Ends -

 

For further information please contact:

 

Annabel Brodie-Smith                             David Elms                   

Communications Director                        Chief Executive 

AITC                                                     IFA Promotion

020 7282 5580                                       020 7833 3131                          

 

Jemma Jackson                         Karen Brunskil/Mark Hanson                   Shellie Wells

AITC                                                     Lansons Communications                       Lansons Communications

0207 282 5583                                       020 7294 3607/ 3663                              020 7294 3627

 

For expert comment or case studies from over 170 media-friendly IFAs, journalists should call IFA Promotions Media Services hotline on 020 7294 3682 or search online in Press Centre at www.aitc.co.uk

 

Notes to Editors

 

1)       Thirty Global and UK fund managers from AITC member investment trusts responded to the joint AITC/IFAP poll representing 10.5 billion funds under management, a fifth of the industry, along with 389 IFAs, polled by IFAP.

2)       The private investor research was carried out by BMRB through the Access Omnibus Surveys on 14-16 November 2003 from a sample of 1,385 private investors in the UK.

3)       16 Global fund managers commented on which countries they thought would perform best in 2004 (UK fund managers were not asked this question).

4)       Investors can find a local IFA focusing on investment trusts at www.aitc.co.uk.

 

The Association of Investment Trust Companies was founded in 1932 to represent the interests of the investment trust industry the oldest form of collective investment.  The AITCs members believe that the industry is best served if it is united and speaks with one voice.  Today, the AITC is the primary source for information on investment trusts. The AITC has 262 members and the industry has total assets of approximately 54 billion.

 

IFA Promotion was established in 1989 to promote the value and accessibility of independent financial advice to the public.  It represents over 10,000 firms of independent financial advisers across the UK and is sponsored by 28 leading financial institutions. In 2002, over 300,000 consumers and businesses used IFA Promotion to find local independent financial advice.

 

 

IFA Promotion believes Independent financial advice should be:

 

          Affordable.  The option to take independent financial advice should be available, by right, to all - not just the wealthiest in society.

 

          Convenient.  IFAs should be available in the location of the consumers choice, wherever they live in the UK.

 

          Transparent.  It must be clearly transparent to consumers who is able to offer independent financial advice and who is not.

 

Independent Financial Adviser Promotions sponsors

 

AXA	Norwich Union Life
Bright Grey	Old Mutual Asset Managers
BUPA	Prudential
Canada Life	Scottish Equitable Plc
Childrens Mutual	Scottish Life
Clerical Medical Investment Group	Scottish Mutual Assurance Plc
Eagle Star	Scottish Provident
Friends Provident	Scottish Widows Plc
GE Life	Selestia
INVESCO Fund Managers Ltd	Standard Life Assurance Company
Legal & General	Skandia UK Group
Mortgage Express	Winterthur Life UK Ltd
National Savings & Investments	Zurich Life Assurance Company