Premier Miton’s multi-manager team has identified four asset classes it is bullish on for 2024.
Mark Rimmer, fund manager in the team, laid out why he believes the four are poised for a strong run next year, and made a fund pick for each.
“The last few months have been challenging for the majority of bond and equity markets, as investors have been slow to come to terms with the narrative of interest rates being higher for longer, though markets appear to have now accepted this notion,” Rimmer said.
“Into early November, both bonds and equities have seen some recovery, as markets now believe that the interest rate hiking cycle may well have peaked.”
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Although the outlook remains very uncertain, Rimmer still sees plenty of opportunity in markets, and chose to highlight a quartet of good options.
“UK equities have been unloved for some time now, arguably since the Brexit referendum way back in 2016,” he said. “UK equities held up better than most markets last year in what was a difficult year for most equity markets. This year they have lagged most major developed equity markets, though they have still produced positive returns.”
Rimmer added that valuations in UK equities remain compelling, certainly better than the US where valuations remain stretched, while also producing an attractive level of income.
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“In addition, despite the constant negativity concerning the economy, the UK’s GDP numbers were recently revised up, and since covid the UK has recovered better than either France or Germany.”
A fund the team favours in this asset class is Montanaro UK Equity Income.
Japanese equities is a market that has gone under people’s radar, Rimmer noted.
“We have felt there has been an opportunity here for some time, and our patience has finally been rewarded as Japanese equities have been performing better this year as the economy has gained some momentum as it has emerged from Covid.”
The firm said there is more to go from here as valuations remain reasonable, there are encouraging upgrades to company earnings, and there are several ongoing corporate governance improvements which may continue to appeal to investors. Rimmer picked out Man GLG Japan Core Alpha as a fund to watch.
The third asset class picked out was bonds.
“Bonds have had a torrid time over the last three years in the higher inflation and rising interest rate environment,” Rimmer said. “Having been very cautious on bonds for a long period of time, it now seems that some value has finally emerged here.
“We remain wary of high yield bonds, as we do not think investors are being adequately compensated for the possibility of higher defaults if the global economy weakens more than anticipated. We do see value in shorter maturity high quality bonds.”
He pointed to Royal London Short Duration Credit as a pick here.
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The final of Rimmer’s quartet was property.
“The property market has been very sensitive to rising interest rates, with commercial property (by which we mean retail stores, offices and industrials) under pressure,” he said. “With valuations much improved, this makes the sector more interesting.
“Our allocation to property tends to be focused on more niche areas, and we favour properties with long leases and less tenant risk.”
“A property company we currently favour in this asset class is Assura Group,” he added.
