The latest multi-manager survey from Aviva Investors, the global asset management business of Aviva plc (Aviva), has highlighted that equity fund managers expect large caps to deliver the strongest performance in 2016 and unanimously expect global volatility to remain at the same level or increase.
The survey also shows a split on the outlook for global emerging markets, with opinion divided on potential returns.
Now in its fourth year, the Aviva Investors Multi-Manager Survey asked fund managers - representing more than £2 trillion of assets under management - for their views on the outlook for markets and likely macroeconomic influences for 2016. Respondents were based predominantly in the UK, but with a global investment scope.
Large caps to deliver best performance, led by Healthcare and Financials
Nearly 50% of managers expect large caps to deliver the best performance this year, relative to both small and mid caps. Healthcare and Financials are predicted to be the best performing sectors, followed by Consumer Discretionary and Technology stocks.The Materials sector is expected to underperform most, (38%) followed by Consumer Staples and Utilities (31% each).
Strongly divided opinion on outlook for emerging markets
Reflecting uncertainty in the markets, predictions for global emerging markets showed particularly divergent extremes: 23% of respondents expected negative returns and 27% expected returns of 10% and above.
Fall in IPO activity expected
42% expect new IPO listings to fall compared to 2015 whilst less than a fifth (17.8%) of managers anticipate that IPO activity will increase this year. This is significantly down from last year’s survey, which showed nearly three quarters (72%) expecting the same or an increased level of IPO activity in 2015.
China and general market uncertainty remains a concern, but economic recovery and earnings growth offer opportunities
Two thirds (66%) of managers surveyed expect concerns around China to affect markets negatively this year. Half of the respondents (52%) see general market uncertainty and macroeconomic issues as posing the biggest risks to equities in 2016. Looking towards more positive indicators, 54% of respondents expect economic recovery and stronger earnings growth to provide the biggest opportunities for equity investors.
Inflation considered unlikely in the Eurozone; less confidence in ‘Abenomics’
The survey revealed that inflation in the Eurozone this year is expected to remain at the same or at a lower level, with 55% expecting no positive Eurozone inflation this year. Managers are also less confident that ‘Abenomics’ will succeed in Japan than in 2015, with 46% of respondents backing the government’s policy compared to 61% last year.
UK interest rates to rise by end of 2016; oil price to recover to $40-60 a barrel
Expectations of an increase in UK interest rates this year are shared by 69% of participants. The same number also anticipated an increase in the oil price, expecting it to be between $40-60 by the end of the year. Just 7% of managers expect it to remain below $40.
Ian Aylward, Head of Multi-Manager Research at Aviva Investors, said:
“Equity markets have had a rocky start to 2016 and it is unsurprising managers expect more of the same. It is particularly interesting to have such a divergence of views in terms of predicting returns from emerging market equities, which speaks to how increased volatility is causing uncertainty among investors.
“Given the strong returns that Consumer Staples have enjoyed over recent years, it is surprising to see it is the sector expected to perform second worst this year. Perhaps this is due to the lofty valuations – time will tell.”
The survey was conducted during December 2015 and relates to the responses of equity managers only. Thirty two managers based in the UK, US and Europe were surveyed.
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Aviva Investors is the global asset management business of Aviva plc. The business delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 15 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £267 billion as at 30 September 2015.
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