Aegon’s Audrey Ryan believes an increase in M&A activity will drive UK equity returns in 2010.
Ryan, who manages the £44.7m UK Opportunities fund, says mergers and acquisitions will become increasingly common this year as large corporates have improved access to the debt market.
With growth hard to come by and confidence increasing among management, acquisitions will be a focus for driving returns, she adds.
Ryan favours corporate over consumer spend going forward and expects discretionary business spend on capital equipment, recruitment and business-to-business media to recover with the profit cycle.
As a result she has recently added B2B publisher Informa to the portfolio.
Ryan believes growth this year will be anaemic and favours companies with international earnings, particularly from the emerging markets, for their superior earnings prospects.
She also feels stock selection will become key over the remainder of the year.
“For much of the last couple of years, equity markets have been driven by macro and liquidity factors,” Ryan says.
“As large swings in macro factors fade, market performance will move on with micro becoming more important.
“The equity market is likely to become more discriminating between winners and losers and we have increasingly focused on businesses able to generate top-line growth and not just margin recovery.
“We also believe there is scope for the dispersion of earnings multiples to widen further, with growth stocks re-rating at a larger premium, specifically stocks that are beneficiaries of secular or structural growth.”
