Which asset class would you invest in next year?

As the year draws to a close, we asked a number of Elite Rated multi-asset managers what has been their best asset allocation call of 2021 and which asset class they would pick for 2022.

Jason Borbora-Sheen, co-manager of Ninety One Global Income Opportunities

“The best call in the Global Income Opportunities fund for 2021 was to double its exposure to real estate via REITs which at the time were offering compelling yields at attractive valuations (e.g. American Tower, Crown Castle and Simon Property). Simon Property has roughly doubled in value over the year and global REITs have added around 25%.

“Heading into 2022 we favour volatility strategies, such as options, that can protect the fund in a less benign market environment.”

David Coombs, manager of Rathbone Strategic Growth Portfolio

“Whilst not the biggest contributor to performance this year, our exposure to oil companies and commodities has perhaps been the most important. It provided us with positive returns at important points through the year, in particular when energy prices were rising, and often when the majority of other asset classes were struggling in that environment.

“Turning to next year, Chinese equities could see a reversal of fortunes, with attractive starting valuations, easing regulatory concerns, more accommodative monetary policy, and maybe even a boost from the Winter Olympics!”

Kelly Prior, a member of the multi-manager people team behind BMO MM Navigator Distribution

“If you can call ‘boutiques’ an asset class then that was our best area of investment in 2021. The flexibility and focus of managers such as Tellworth in the UK, CIM in Asia, and Findlay Park in the US has been fantastic.

“In terms of 2022, we remain cautious but not bearish on the broad market. What we do see is a rich stream of opportunity in the unloved, and in particular income paying equity with the UK being a fantastic hunting ground. Granted, the new restrictions may cause temporary volatility, but looking at the fundamentals we believe company management.”

And if you had to pick one asset class in which to invest next year?

Anthony Willis, a member of the multi-manager people team behind BMO MM Navigator Distribution

“If we had to sort of order these things, we’d go with equities, then alternatives and absolute return products, and then fixed income at the bottom of the pile. In terms of equities, that’s where we think there’s the best risk/reward for 2022. We think there’s good opportunities and we’d like to see a continued rotation away from growth and those long duration assets that have done very well in a low interest rate environment, into value – which obviously had a brief moment of very strong performance after the vaccine news back in November 2020. But I think in an environment where rates are starting to pick upwards, value can outperform once again.

Vincent Ropers, co-manager of TB Wise Multi-Asset Growth

“That’s a difficult question and it might sound like I’m copping out, but we are fully flexible multi-asset investors. So not only have we got the luxury of not having to choose a single asset class but more importantly, I don’t think our role is to put all our clients’ money in one basket at the start of each year. Another point is that we are not strategists that recommend broad asset classes or indices as fund of funds investors. We are active managers that invest in other active managers. So, asset allocation is only one of the drivers of our performance.

“But with all of that said, given our cautiously optimistic outlook, we think equities should continue to perform well. But selectivity will be required. And we like particularly the value style and areas such as the UK, Japan and emerging markets, which have lagged in the recovery. And finally, as inflation will remain a key theme next year, commodities, infrastructure, and floating rates are also on our radar.”

Matthew Stanesby, co-manager of Close Managed Income

“I would say equity income. And the reason I say that is because we think we’re going to have slightly higher inflation than we used to. We’re probably going to be seeing interest rate rises and, in that environment, shorter duration investments do better. And that’s exactly what equity income is: you get your income today, you don’t have to wait for tomorrow. It’s got the added benefit as well, that if growth does slow, you’re getting income and it has defensive qualities. So again, it kind of protects you if we get a bit of inflation and we get rate rises, but also if growth disappoints. So that would be my tip for next year.”