The AIC: IT-focused investment companies and UK trusts tipped to be top performers in 2024

AIC takes poll of investment trust managers for 2024

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2024 is anticipated to be a promising year for the information technology sector, global stockmarkets, and the UK region, according to the Association of Investment Companies’ annual poll of fund managers.

The information technology sector was selected by 26% as the highest-performing sector. Others expected to do well included industrials, making up 19%, and healthcare and energy, both at 15%.

When looking further into the future at five-year performance, information technology is expected to vastly be the favourite, with 44% of respondents anticipating it to be the leading sector.

Geographically, the UK came out on top for best-performing region at 44%, with the second and third-place countries of US and Japan following at a distance, with 15% and 11% respectively.

See also: AIC survey: Advisers and wealth managers ‘deeply sceptical’ about fund sustainability claims

Annabel Brodie-Smith, communications director at the AIC, said: “The UK is perceived to be the most attractive region in 2024 and over the next five years, and the majority of managers are bullish on stock markets.

“Most managers believe interest rates have peaked and inflation is reducing, though the pace of this may well be slow. The continued threat of a recession remains, along with the risks associated with the war in the Middle East and the impact it may have on oil prices.”

Global stockmarkets remain an area of positivity for fund managers, with 70% believing the market will rise over the next year and only 15% holding the belief it will fall. Some 65% of investment managers believe the FTSE 100 index will succeed the 7,500 mark by year end.

Andrew Bell, manager of Witan Investment Trust, said: “In 2024, global growth leadership is likely to shift from the US towards Europe and emerging markets, though initially through the US slowing down rather than booming conditions elsewhere.

“This should be reflected in equity returns, where valuations remain optimistic in the US and over-concentrated, contrasting with modest ratings elsewhere. We expect another year of (modestly) positive returns, as interest rate sentiment improves.”

While there is a relatively united front in the continuing fall of inflation, backed by 93% of investors, there is less faith in this being a speedy process. Almost half of investors, 41%, believe the bank of England won’t reach its 2% goal until 2026, while 33% believe this will happen in 2025. Only 7% think this will happen by the end of next year.

Julian Bishop, co-lead portfolio manager of Brunner Investment Trust, said: “Regarding interest rates and inflation, many of our holdings actually benefit from higher prices.

“We deliberately seek out investments that provide inflation protection in this way. For example, if Nestle puts the price of a KitKat up 10% and the margin is held steady, profit per KitKat goes up 10%, preserving the company’s earning power in real terms. Similarly, Visa’s sales are a very small percentage of credit and debit card transaction values, which are boosted by inflation.”

Despite an extended process, 15% of managers list cooling inflation as the greatest cause for optimism, while 30% name reducing interest rates. On the flip side, 26% of managers’ greatest fear for the next year was recession.