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Fund managers optimistic about markets in 2011

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Optimism among fund managers has increased by 18 per cent on last year with 92 per cent predicting that markets will rise in 2011, compared to 74 per cent this time last year, according to a poll by the Association of Investment Companies. 



Managers are considerably more optimistic about the prospects for the FTSE then they were last year with over three quarters (77 per cent) predicting the FTSE will close 2011 between 6,000 and 6,500 compared to last year when 58 per cent predicted it would close between 5,500 and 6,000. 

Equities have been tipped as the best performing asset in 2011, being backed by an impressive 80 per cent of fund managers (up from 50 per cent in 2010).

Once again this year, blue chips have been narrowly knocked off the top spot for the best prospective performing sector with 28 per cent of managers choosing resources (including oil) as the best performing sector, followed by blue chips (16 per cent).

For the first time, geopolitical instability and the threat of terrorism (34 per cent) have been cited as the biggest threat to equities in 2011. These concerns were followed by the threat of global recession and high inflation (both 21 per cent).  Not surprisingly, 32 per cent of managers said that better global growth than expected was their biggest cause for optimism. 

2010 has been a positive year for new launches in the investment company industry with 17 new launches compared to just five in 2009 (including VCTs). Thirty eight per cent of managers questioned are predicting even more new launches in 2011, and a further 57 per cent believe that new launches will match 2010’s activity. VCT fundraising in the 2009-2010 tax year was more than double the previous year and 72 per cent of managers believe that this is due to changes in income tax rules. 

Emerging markets (20 per cent) is once again the favoured sector for 2011. However, it is closely followed by Japan and Far East excluding Japan and frontier markets (all 16 per cent), Latin America (12 per cent), UK (12 per cent) and US (eight per cent). The prominence of emerging and frontier markets has been evident in the new investment company launches this year, which represented nine different sectors across emerging markets and specialist sectors.

Ian Overgage, acting communications director, AIC, says: “2010 has seen a steady increase in markets with the FTSE 100 up around 500 points (at the time of writing) over the year. This is clearly reflected in the optimism of managers, with 92 per cent predicting that markets will continue to rise into 2011. The recovery seems set to continue for the immediate future and fund managers are once again backing equities (80 per cent) as the top performing asset, putting their faith in the emerging economies as the sector to watch and resources as the sector of choice.” 

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