Three quarters of IT managers expecting FTSE rally in 2011

Investment trust managers are optimistic equities will rally in 2011 and 77% expect the FTSE 100 to end the year between 6,000 and 6,500, according an AIC survey.

The managers predicted emerging markets as the best-performing region, and resources as the standout sector.

The AIC poll also found managers are optimistic about the macroeconomic global outlook, with 32% of managers saying better-than-expected global growth had given them cause for optimism.

Meanwhile, sentiment on markets had improved, as 92% predicted a rise in 2011, an increase of 18% from last year.

Ian Overgage, communications director for the AIC, said 95% of managers predict new investment trust launches in 2011 will continue at a similar rate to the 17 new vehicles brought to market this year.

“It is interesting to note the new launches in 2011 came from a wide variety of different sectors with a focus on emerging markets and specialist sectors,” Overgage said.

“It is important to remember that while it is interesting to gauge the views of professionals, it is nearly impossible to predict what will happen to markets in the future – one year’s top sector could become the next year’s worst performer.

“It is therefore important to take a long-term view on your investments and make sure you have a balanced portfolio and do not get too led by stories of the next ‘hot sector’.”

Dr Slim Feriani, CEO of Advance Emerging Capital, said emerging markets will prosper in 2011 as the asset class matures.

Feriani said emerging-market companies recognise the importance in paying out dividends and the average yield for the asset class is now 2.5%-3%.

“The outlook for emerging and frontier markets in 2011 is solid. Reasons to be positive include healthy and improving fundamentals, superior growth, compelling valuations, positive structural change and supportive technical factors,” Feriani said.

He dismissed the prospect of an EM bubble and pointed out global equity funds are 7% weighted in emerging-market equities compared to the benchmark weight of 14% in the MSCI All Country World index.

“Investors in the EM investment trusts sector remain sceptical, and the sector still trades at sizeable discounts, but 2011 could be the year when this sector finally gets its well-deserved structural re-rating,” Feriani added.

Andrew Bell, CEO of Witan investment trust, is confident on the outlook for emerging-market equities and has positioned his fund to be overweight the region after increasing his exposure by 8%.

Bell now holds 18% of the trust in emerging markets and said they are likely to continue punching above their weight.

“Although optimism towards emerging markets has risen, verbal optimism appears greater than committed capital – it seems premature to lean in the other direction on the grounds the story is fully discounted,” said Bell.

“Investors should take full account of corporate governance and valuation in this increasingly important asset class, while also being alert to opportunities to gain EM exposure through multi-nationals quoted in developed markets.”