“Not very”, they concluded.
A sentimental, misdirected journey
A group of 20+ fund management firms were, for example, positive on UK equities throughout the year when the ride, as measured by the FTSE 100, was up and down. In reality, it was down a little, up a little then down a little more in each of the first three quarters before a dramatic rise in Q4.
They were similarly optimistic on the US while the S&P 500 actually took the best part of six months to meet their expectations; Asia Pacific ex Japan took until the very final quarter to catch up.
In Japan their views and the index performance were diametrically opposed – mangers were positive when the index remained negative throughout the year; their outlook for Europe got worse as the index got better.
Gary’s conclusion at the time was: “What can we learn from these predictions? Well they can be as fuzzy as the blurb at the bottom of a fact sheet saying the value of an investment “can fall as well as rise”. Of course, having a view on the prospects of an asset class is different from the skills used at a micro level by the experienced stock picker, but with increased scrutiny of TERs comes more pressure on fund managers to make sure they get the calls right.”
So how have their predictions changed in the first quarter of this year?
Using our manager sentiment survey – a bespoke database of monthly fund manager opinions compiled in conjunction with Skandia – plotting a comparison across nine ‘usual suspect’ equity categories for the sentiment readings in Q1 2012 and Q1 2013, sentiment is very different indeed.
Still a bit ‘wait and see…’
Japan is far and away the region that the fund groups are most positive about – the sentiment index has moved from 20 up to 72; sentiment for emerging markets is up (44 to 56); as it is for BRIC equities (39 to 53); as well as Pacific ex Japan (32 to 39).
Looking at a Western equity comparison, the manager sentiment has moved south for UK equities (51 to 33) and their US peers (48 to 11) – interestingly, their small-cap equivalents are seen in a more positive light – with Europe seen slightly less favourably (13 to 11).
So what is the conclusion now?
If Gary and Will’s summation is continued into the first three months of this year, Japan is not the answer or even part of an answer.
Needless to say, it will take at least another quarter to get a feel for whether these predictions are actually accurate or not and all we can see for the moment is how different managers’ views on what’s hot have become in the past year.
Compared to the positions at the end of last year, the fund management groups’ predictions now are probably more focused than fuzzy as, with the exception of Europe, there are some very distinct signs of which direction economies and their respective markets are currently trending in.
The overall conclusion, however, remains the same – it is a stock-pickers market. If Japan is the answer according to these fund groups, fund buyers need to be careful what question they are asking.
