Investors will also be keeping a close eye on the price of oil as added turmoil in the Middle East may reduce supplies, pushing the price up.
This may explain why managers expect the natural resources sector to perform best over the next year. It is a diverse sector where some of it constituents such as gold, platinum and si
lver may benefit from market uncertainty. Others like metals, natural gases and oil tend to benefit from an economic upturn where the outlook for manufacturing improves.
Financial services and life sciences follow closely behind as the predicted next best performers. Financial services fell this month to 25% from 34% last month. Banks and insurance companies have suffered recently under the pressure of falling markets. Some 20% of managers said it would be the worst performer over the next year.
Mixed signals
The survey revealed mixed sentiment on share funds. Some 82% said they would be the strongest performing asset class over the next 12 months. This was down only slightly from August in favour of balanced funds, which weighed in with 13%.
The likelihood of share funds attracting the most money over the next year improved at the expense of fixed income funds. Share funds held steady at 31% while fixed income products fell to 36% from 48% in August. Balanced funds gained some ground rising to 22% from 17% in the previous survey.
Yet there was a significant drop in managers saying share funds would dominate launches, to 36% from 57% in August. Managers saw increases in the launch of both balanced and fixed income funds.
Another note of caution sounded as 42% of managers said guaranteed funds – those with an element of capital protection – would dominate new fund launches. This was a jump of nearly 20 percentage points from last month and the highest since survey began in December 2001. Conventional funds followed with 24%.
Only 4% of managers said the performance of shares would be lower over the next year. Nearly 40% expected returns of 5-10% while the same number expected to see a range of 10-15%. The fieldwork for this survey was done before this week’s volatile stockmarket moves.
Look east
More than half of managers said Asia excluding Japan would be the top performing region over the next 12 months. The same proportion said Latin America would provide the worst returns. Managers may be avoiding the region because of political uncertainty. It looks increasingly likely that Luiz Inacio Lula da Silva, the left-wing candidate, will win the Brazilian elections.
America saw an improvement in sentiment towards its currency and markets. It tied for second place in terms of manager perception with Europe excluding the UK. This was an upgrade for the US but a step down for the European region.
The euro lost favour but was expected to remain the top performing currency over the next year by 69% of managers. The dollar gained 12 percentage points in this area.
Most managers were not impressed with the outlook for Japan. Some 54% said the yen would be the worst performing currency. Managers also said it was likely to be the second worst performing market.
Morningstar’s European offices conducted the survey from September 13th-23rd. The participants, 56 fund management groups from 9 countries, on average managed €53 billion (£32 billion) and offered 96 retail funds.
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