Financial advisers expect the top three performing assets over the next 12 months to be US equities (22 per cent), emerging market equities (15 per cent) and UK equities (14 per cent), according to new research by Aegon.
The study of over 200 financial advisers, which Aegon says comes as investors face having to navigate a complex range of factors including trade tension and growth concerns, with many questioning if the longest bull market in history could be coming to an end, also reveals that the worst performing assets over the next year are expected to be cash (24 per cent), gilts (19 per cent) and corporate bonds (8 per cent).
Views differ though, depending on the average size of investment pot, while a high proportion (22 per cent) of advisers don’t know which asset class they expect to generate the best returns over the next year.
UK equity funds have seen record outflows since the Referendum in June 2016 but despite this, a high number (14 per cent) of advisers put this asset in their predicted top three best performing asset classes. Similarly, despite recent falls, US equities (22 per cent) and emerging market equities (15 per cent) were also ranked highly by advisers.
While cash may be viewed by some as a safe haven during times of volatility, research shows that advisers expect cash (24 per cent) to be the worst performing asset over the next year. Gilts are ranked in second place (19 per cent) as the asset class advisers predict will perform the worse, with corporate bonds in third place (8 per cent).
The mixed predictions of advisers reflects current market volatility and political instability, with a high proportion (22 per cent) of advisers unsure of the asset class they would predict to generate the best returns over the next 12 months.
Research shows that views on the asset classes expected to generate the best returns for clients differs depending on the advisers average client portfolio value. For advisers whose clients’ have an average pot of GBP200,000 or more, Asia Pacific assets are predicted to be the fourth highest performing asset at 11 per cent, compared to the 4 per cent figure for advisers whose clients’ pot is on average under GBP100,000. Similarly, advisers whose clients’ have an average pot of under GBP100,000 are more likely (6 per cent) than advisers whose clients’ have an average pot of over GBP200,000 (2 per cent) to expect Japanese equities to perform well in the next 12 months.
Nick Dixon, Investment Director at Aegon, says: “In this highly volatile investment landscape, advisers are right to question whether the longest bull market in history could be coming to an end. When it comes to investment decisions, advisers and investors are having to face a number of concerns head on. This includes the impact of geopolitical stress on emerging markets, equity valuations, and potential impact of Brexit on UK equities. However, our research shows that advisers remain level-headed in the face of a very fickle market. Advisers are right to remain focused on long-term returns, diversification, and avoid reacting to fast moving market conditions.”