It's a great time to be an investor right now.
There are hundreds of funds to choose from, giving exposure to everything from ethical portfolios to the riskiest emerging markets, there will be something to meet their needs.
The biggest problem is deciding where to commit their cash.
The sheer number of options is mind-boggling and that’s before political instability, economic uncertainty, and the unpredictability of many companies is considered.
We have quizzed multi-managers – whose role is to invest in a variety of different investment funds – on the asset classes, countries, sectors and individual companies they are avoiding, as well as those they believe have the best prospects.
Any talk about investment opportunities should be preceded with the word ‘relative’, according to Joe Tennant, product manager of the Schroders Multi Manager team.
“There is little absolute value out there, with valuations being the key constraint to a number of asset classes,’ he said.
The length and strength of the current equity bull market continues to surprise him. “US equities (S&P 500) are now more than eight years into this run and have delivered well over 300% in returns,” he said.
“Given the post war average bull run is five years and delivers circa 160%, it is clear to see quite how richly priced US equities have become.”
The global rally in equities continued in May with political risks fading more into the background, according to Adrian Lowcock, investment director at Architas.
“It appears investors are regaining confidence as they look for opportunities in those markets which would benefit from a resurgent US economy, a weaker US dollar, and continued positive outlook in global growth.’
Toby Ricketts, manager of the Margetts International Strategy fund, expects interest rates and inflation to gently rise with more robust economic growth.
“We expect equities to out-perform bonds – particularly those that respond positively to economic growth through increased earnings,” he said.
“We are pro-equities on a global basis but the US market may underperform other equity markets going forward.”
Roger Clark, who manages the HL Multi Manager Special Situations fund, is also unenthusiastic about the United States. “The US market is quite expensive now,” he said. ‘It is also difficult to find active managers that add value consistently.”
Bill McQuaker, portfolio manager of the Fidelity Multi Asset Open range, agrees that US equities look fully valued, especially compared to some other equity markets. As a result, he has added to European and Japanese equities at the expense of commodities and UK Government bonds.
“Both Europe and Japan should benefit from strong global growth, and Japan has generally lagged equity markets this year,” he said. “We are also closely monitoring the Chinese economy, which is likely to slow as the impact of policy tightening begins to feed through.”
As it happens, Japan has already shown signs of encouragement in recent weeks, according to Adrian Lowcock at Architas.
“Japanese stocks had a good month as the outlook for the country improved as consumer spending started to rise and inflation returned to the country,” he said. “The Japanese market continues to look cheap compared to other developed markets.”
Nathan Sweeney, who manages funds for Architas, is concerned about UK commercial property because he believes the sector is being adversely affected by changes in the way people work.
“Office space is one of the big fixed overhead costs for companies so many are allowing employees to work from home,” he explained.
Sweeney prefers specialist property exposure and likes the Tritax Big Box fund, a Real Estate Investment Trust investing in very large logistics facilities in the UK.
“We’re in the internet age and companies need big distribution warehouses but there’s not enough of them in the UK,” he said. “Online shopping is increasing and that will only continue.”
He is also worried about the UK retail sector. “People have been spending hard but debt levels in the UK are quite high so we do expect to see some consumer retrenchment,” he added.
David Lewis, a manager on the Jupiter Merlin funds range, is underweight oil & gas and doesn’t believe the oil price will go up soon.
“The active managers we buy tend to focus more on companies with greater visibility of earnings,” he said.
“We are underweight materials as we don’t see huge growth coming out of the major markets.”
Roger Clark at Hargreaves Lansdown prefers funds that focus on mid and small cap companies.
“This is where you’re more likely to find the best stock picking managers who add value,” he said. “This means we are naturally underweight sectors such as oil and gas.”
Ubiquitous as it may be, Jupiter’s David Lewis is negative on technology giant Apple.
“It’s obviously been very successful but the question is what it does now,’ he said.
“Our managers have generally steered away from it due to the faddishness of consumer tech.”
Helal Miah, investment research analyst at The Share Centre, believes several companies are poised to benefit from the current environment over the next few months.
Marston’s, the independent brewing and pub retailing operation behind brand names such as Pitcher & Piano, will be boosted by people drinking when the sun shines.
“Interested investors should appreciate the group has plans to expand, with 23 new built pubs and eight accommodation lodges planned for this year alone,” he said.
Carnival, meanwhile, may benefit from the increasing popularity of cruises. The company is a giant in this industry with a fleet of 100 ships.
“The group continues to see a sustained improvement in booking trends with yield growth expected to continue through 2017,” added Miah.
Then there’s Unilever, the manufacturer of a wide range of consumer goods. With brands including Dove and PG Tips, there’s a good chance of investors owning some of its products.
“The weak pound has helped the group beat expectations of late and there is certainly encouraging signs in many of its key markets,” added Miah.