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Looking ahead

22 December 2017

The AIC’s Chief Executive Ian Sayers reflects on the high points of 2017 and the upcoming 150th anniversary of investment companies.

As some commentators have noted, this must be one of the most unloved bull markets of all time.  Whether it is Brexit, Trump, stretched valuations or North Korea, there is no shortage of issues that could keep you awake at night wondering whether we are at the top of a bubble that is about to burst.

Even if you are not so pessimistic about the future, there is little of the investor euphoria that often characterises such periods.  Or, at least, that was what I thought until I saw the current surge in the price of a Bitcoin (whatever that is).

However, for the time being, the investment company sector continued to enjoy its day in the sun in 2017, with assets hitting record highs on a regular basis and the sector delivering strong positive returns over 1, 3, 5 and 10 years and also outperforming mainstream markets and its open-ended competitors. 

Fundraising, which slowed slightly in 2016, picked up again in 2017.  Once again, this demand was driven by the sector’s unique advantages in delivering a higher and growing income.  Most of this was also in asset classes such as infrastructure and property which are much more suited to the closed-ended structure of an investment company.  I doubt the small hike in interest rates this year will do much to dampen demand for income in 2018. 

However, in the spirit of looking backwards as well as forwards, we are busily making our plans to celebrate the 150th anniversary of the launch of the first ever investment company, Foreign & Colonial Investment Trust, in 1868.

Our themes for this celebration will be about long-term investing, stability and innovation.  Though the world has changed almost beyond recognition in this time, it is amazing to look back and see the parallels that exist today.

After all, some of the earliest investment companies invested in new infrastructure projects in the emerging markets of their day (e.g. US railways).  Today, the technologies are very different, as are the locations, but the desire to seek out the best returns wherever they may lie remains undiminished.

Of course, investment companies have had to ride out difficult times as well, such as the 1929 crash and Great Depression, and more recently the financial crisis.  But this longer-time perspective should provide reassurance that even the most severe market disruptions eventually pass and that those investors that kept their nerve and did not panic were well rewarded.

Which sort of brings me back to where I started.  At these times, when we begin to wonder if and when the market might run out of steam, it is always prudent to remember why you started investing in the first place.  And to remind yourself of the principles you said you would abide by, such as keeping a well-balanced portfolio and a long-term time horizon. 

Keep these two in mind, and you will be well positioned for whatever 2018 has to hold.

Ian Sayers is Chief Executive of The Association of Investment Companies (AIC)

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