By Maximilian Clarke
As the New Year looms, fund managers from Legal and General discuss the outlook of 2012 investments in light of ongoing challenges to the global economy.
Richard Penny, UK Alpha Trust
Financial turmoil in Europe in H2 heightened volatility conditions. This caused investors to look away from less well known, less liquid names in favour of large blue chip companies, which proved challenging for our fund in the short term but has also provided some good opportunities to pick up discounted stocks. For 2012, we remain cautious on the outlook for the UK economy. However, this does not necessarily mean cautious outlook for UK equities which often have much wider exposure.
We maintain our contrarian approach to stock picking. Past experience has demonstrated that such an approach can provide plenty of opportunities. We invested in many of our best performers during challenging times in 20008/09.
Robert Churchlow, Growth Trust
Going forwards the major risk is the depth and the lengthy evolution of the European crisis. We are concerned that the sovereign crisis has done lasting damage to growth. In light of this, Growth Trust has maintained a limited exposure both towards European, and towards purely domestic plays.
We maintain our high conviction, 25 equally weighted [positions approach. Conviction levels in stocks held on Growth Trust remain as high as ever and now is the time for contrarian investors to buy into the fund!
Richard Black, UK Equity Income
In highly volatile conditions Equity income outperformed the market, and our fund outperformed its peers and the FTSE All Share by mid single digit % points.
For 2012, we remain cautious on the outlook for the UK economy. However, with over 70% of the revenues of the funds holdings derived from overseas, and with limited exposure to Europe, we are optimistic on the prospects for UK equity income. With high volatility, low global growth and low interest rates the 1st half of 2012 is set to see UK equity income continue to outperform as an investment style.
Robert Churchlow, Graham Taylor & Guy Rushton (deputy managers), UK Absolute Fund
Despite difficult conditions in 2011 the fund has delivered strong performance driven by stock selection. We expect market volatility to remain high and will continue to be opportunistic in spotting the market anomalies that inevitably arise in such market conditions.
Gavin Launder, European Absolute Fund[u/]
The sovereign crisis across Europe holds centre stage for investors worldwide. Unable to see beyond the polar outcomes for the Eurozone - fiscal unity or break-up - Equity markets are increasingly pricing in the latter.
We remain of the view that the underlying economic outlook remains poor, with Europe heading for recession in 2012, and that European politicians will take longer to set a path to safeguarding the Euro through closer fiscal integration. However, in an environment of thin volumes and after such weakness earlier in the year, counter-trend rallies are likely to continue to be a feature of the market.
[u]Suresh Sadasivan, Pacific Growth Trust
Asian markets remained in the thrall of European macro dislocations; within the region tight monetary policy due to heightened inflationary pressures impinged on growth leading to earnings downgrades across the region. Markets that outperformed generally had more favourable policy conditions.
Valuations in the region are attractive relative to history and assuming a muddle through in Europe, positive returns should be seen driven by policies across major markets.
Paul Hilsley, Asian Income Trust
Given its defensive nature, the Trust performed well against the region this year and its yield increased significantly to 5.6%.
Risks remain of policy error but monetary easing and already attractive valuations may provide some protection into next year.
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