Asset Classes
The clouds may have a silver lining
The market turnaround last year can boast some big
figures (the FTSE 100 up 46% and the FTSE 250 up 58%),
largely because they are based on a comparison with
2008 so are, by definition, starting from a very low base.
Corporate bonds had a storming 2009 – sales of
£5.97bn were up from £1.61bn in the previous calendar
year. As is typical investor behaviour – when they look
for the clouds rather than the silver lining – both UK midcap
and corporate bond funds are expected to start on
a steady fall given the extent of their success last year.
But this is far from the case and there is plenty of room
for upward manoeuvre in both categories in 2010 and
beyond.
■ The FTSE All Share rose by 48% from March to the end
of last year, with the FTSE 350 rising by 47% and the
FTSE 100 by 46%. Both lagged the FTSE 250 (58%).
■ The IMA Corporate Bond sector represents 9% of all
funds sold, with £43.5bn now under management,
second only to UK All Companies (£95.54bn).
■ Gilt returns have struggled by comparison, with the ML
UK 10-year gilt index returning 3% over the same time
period.
Source: Morningstar; IMA
In this section…
Equities
UK MID-CAP FUNDS
60-61
“Across the UK All Companies
sector, you will find a lot of the
good active managers will be
overweight mid-caps because
some of their best active
money occurs in companies
just outside the top 100” Midcap
funds benefited hugely from
the post-March 2009 rally and
while the early money may have
been made they still look attractive
The contrarian
GILTS 58-59
“There are good reasons to
expect gilt yields to rise but
there are equally good reasons
to question this, and experience
shows that the consensus is
often not right in the end” There
are many spurs for investors to feel
bearish on gilts but there are also
plenty of reasons why investors
would be wrong to ignore gilts
altogether
Fixed income
CORPORATE BONDS
62-63
“The argument now for
corporate bonds is one of riskadjusted
value rather than
stunningly high yields and an
accommodative gilt market”
The asset class of choice for 2009
was undoubtedly corporate bonds
though, as with any levelling out of
interest, some doomsayers are
predicting a sell-off in 2010
MARCH 2010 [www.portfolio-adviser.com] PORTFOLIO ADVISER
57
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