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AIC fund manager poll

10 December 2019

UK equities tipped as top performer for 2020.

The UK is the region most investment company managers believe will produce the best stock market return in 2020 according to the annual poll conducted by the Association of Investment Companies (AIC). The poll was carried out with AIC member investment company managers between 13 November and 2 December 2019.

Despite the UK’s challenges over Brexit and a General Election taking place this week, a third of respondents (33%) feel the country has the best prospects for the coming year. This was ahead of Asia Pacific ex. Japan (19%) and Europe and the US which received 10% of the votes each.

Managers believe the prospects for the UK remain strong on a five-year view too. The country garnered the second-highest proportion of responses (24%), behind Emerging Markets which was viewed as the most attractive area over this timeframe (29%). The US was the third most popular choice on a five-year view with 19% of votes.

Causes for optimism

Interest rates remaining relatively low is deemed the biggest cause for optimism in 2020 (24%), followed by global growth improving (14%).

Best-performing sectors in 2020

Even with Brexit and the General Election raising uncertainty for investors, managers are bullish about Real Estate Investment Trusts (REITs). REITs are the joint most popular sector with Software & Computer Services, both receiving 14% of votes as the sectors tipped to perform best in 2020.

On a five-year view, managers think Alternative Energy presents the most attractive opportunity (14%).

Investor demand for ESG

In a year which included demonstrations by Extinction Rebellion and protests by school pupils over climate change, it’s interesting to see that demand for ESG themes has influenced the investment strategies of almost two-thirds of respondents (62%).

Where will the FTSE close at the end of 2020?

Investment company managers are optimistic on the prospects for global stock markets in 2020 with 52% believing they will rise versus 14% expecting a fall. When asked specifically about the FTSE 100, 38% of fund managers think the index will end 2020 between 7,500 and 8,000, with a further 24% opting for a more optimistic 8,000 to 8,500. These were the most popular choices, though 19% of respondents believe the UK blue chip index will end the year below 7,500.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Despite 2019 being a year of Brexit and political uncertainty, it’s promising that investment company managers are most optimistic about the prospects for the UK next year. The UK is also their second most favoured region on a five-year view after Emerging Markets.

“Of course, our investment company managers do not have a crystal ball and no-one knows what will happen next year. Investors need to focus on building a balanced portfolio which can meet their investment needs over the long term and not worry about the short-term unknowns of 2020.”

Manager comments on 2020 and beyond:

Rebuilding trust post Woodford

Andrew Bell, CEO of Witan Investment Trust, said: “The Woodford debacle looks to have arisen from unpremeditated irresponsibility, leading to inadequately understood investments being sold to the wrong people, without regard to proper portfolio construction. Most fund managers have not behaved this way but, inevitably, if there is a fly in the collective soup it attracts all the attention, undermining the reputation of soup. The safeguards against a repeat are for managers to stay within their areas of competence, proper portfolio construction and, vitally, strong corporate governance to ensure investors’ objectives are being faithfully implemented and safeguarded.”

Alasdair McKinnon, Manager of The Scottish Investment Trust, said: “The investment industry can rebuild investors’ trust by making sure they communicate their mandates clearly and stick to their knitting. Investment trusts have the structure required to offer strong risk controls. Large investment trusts in particular have good liquidity, and all benefit from the governance of independent boards who represent the interests of shareholders.”

A golden period for equity investing

Nick Train, Portfolio Manager of Finsbury Growth & Income, said: “With the major US indexes hitting all-time highs in October, up over 20% year to date, and the FT All-Share Index up 10% and close to its own all-time high, it’s clear we are in a golden period for equity investing. We expect growing UK companies to be strong share price performers into 2020 and beyond.”

The UK - a turning point?

Laura Foll, Co-Manager of Lowland Investment Company and Henderson Opportunities Trust, said: “Since the EU referendum result, the UK equity market has been an easy one to ignore. This is backed up by fund manager surveys where the UK languishes at the bottom, in other words is often the largest ‘underweight’ position globally. This decision to ignore the UK may be about to become much harder, if there is, at least to some degree, a resolution on Brexit following the election. An interesting theme this year has been a substantial pick-up in M&A interest within the portfolio – this is a trend we expect to accelerate on any resolution.”

Dean Orrico, President of Middlefield International, the Investment Adviser of Middlefield Canadian Income, said: “We see slightly better growth internationally for the coming year. In the UK, we expect the Brexit headwinds to reverse and assume better fiscal policy measures are on the horizon. We will likely witness a gradual pick-up in Europe as investment flows continue to migrate toward attractive relative valuations. Several institutional investors have already begun to rotate in this direction and this trend could continue.”

Nationalising infrastructure

Dawn Kendall, Manager of SQN Secured Income Fund, said: “2020 will be dominated by geopolitics and political manoeuvres closer to home.  What is clear is that there is going to be an increased focus on infrastructure investment and the potential nationalisation of core industries. The financial sector should not be afraid of these options as there will be opportunity for long-term investment. ESG-labelled investments will continue to be popular with tax and financial regulators pushing for more integration into core investment themes.”

Pietro Nicholls, Co-Manager of RM Secured Direct Lending, said: “Sectors which exhibit strong structural or social-demographic drivers will thrive as we move into 2020 and beyond. Key themes include ageing populations and the need for social infrastructure to meet the needs of the population, and disruptive real estate which supports the delivery of the digitisation of services from digital banking, entertainment, hospitality and transportation.”

ESG – increasing importance

Steve Davies, Fund Manager of Jupiter UK Growth Investment Trust, said: “Outside of the big and quite binary consequences of the election, two other topics are likely to attract a lot of headlines. Our clients are focusing ever more intensely on ESG concerns – and climate change especially – and the scrutiny of sectors such as Oil & Gas and Mining, in particular, will become more focused and more unforgiving. With these sectors accounting for some 26% of the FTSE 100 index, this could become a bigger issue for UK markets than elsewhere and management teams may have to ponder more radical strategic change to convince ever more sceptical investors. Finally, M&A activity is likely to remain high, especially so if political uncertainty persists and the spread of valuations between loved and unloved remains as high as it is currently.”

Alex O’Cinneide, CEO and Founder of Gore Street Capital, the Investment Adviser to Gore Street Energy Storage, said: “Every investment is an impact investment, positive or negative. I believe only business that can demonstrate a positive impact will survive and earn the trust of investors. Investors are more sophisticated, particularly the younger generation and female investors. They are going to be leading the investing community. Beyond 2020, just talking about the bottom line or dividend returns will seem very archaic. Every investment is a signature of the type of person you are, the type of business you want to create. Being successful will be much more about the social value you create for your community and your children’s future.”

Mike Hilton, Founding Partner of PMM, the Property Adviser to Phoenix Spree Deutschland, said: “A key emerging trend, as attitudes and awareness around the globe shift, is the growing importance of environmental, social and governance factors. Increasingly, investors perceive a strong societal purpose or favourable ESG impact to be a fundamental driver when investing in real estate and infrastructure – and a ‘tick box’ approach will no longer suffice. Looking ahead to 2020 and beyond, we can expect investors and key decision makers to place increasing importance on assets that deliver both strong financial performance and long-term, sustainable value creation. PMM follows a well-defined framework to manage existing activities more effectively, whilst adding new initiatives to improve its overall sustainability. It’s important to us that our communities, customers, employees and environment, are at the centre of our business operations.”

Opportunities in Emerging Markets

Bruce Stout, Manager of Murray International, said: “The shift in economic power from west to east does not mean there are no investment opportunities in the UK, Europe and US but they are limited – Murray International’s 9% weighting to UK equities is the lowest I can remember. Companies such as BHP Billiton, Atlas Copco and Intel have the business models and market share to weather the economic climate, expand and, importantly for Murray International shareholders, maintain and grow a sustainable dividend.

“But the deeper pool of opportunities can be found in Asia and Emerging Markets which is why nearly 60% of Murray International’s portfolio is invested there. Emerging market debt offers more attractive yields versus gilts, Eurobonds and US Treasuries, and policymakers have far more tools in the box to fuel growth. Companies generally have stronger balance sheets and are benefiting from being active in countries and markets that are growing much faster than those in the west. Murray International’s strategic emphasis towards Asia Pacific and Emerging Markets may not prove its full worth over the next 12 months but over the next five, 10, 20 years these regions will shine and catch the eye.” 

Charles Jillings, Manager of Utilico Emerging Markets Trust, said: “With the developed markets expected to remain sluggish, struggling to see attractive levels of GDP growth, the Emerging Markets continue to benefit from urbanisation and the growth of the middle class. These factors will continue to be fundamental drivers of these markets in the near term, enabling GDP rates to remain above the global average.”

Emily Fletcher, Co-Manager of BlackRock Frontiers Investment Trust, said: “Emerging market equities have recently started to outperform their developed market counterparts. Emerging and developed market central banks have been easing monetary policy and this has improved the liquidity environment. Given this improvement, we are positive about emerging market and frontier markets for next year and expect flows and investments to return to emerging market equities despite the macro volatility.”

Mark Whitehead, Portfolio Manager of Securities Trust of Scotland, said: “Demographic change will continue to feature strongly in our research agenda during 2020. Specifically, we remain excited by the raft of opportunities that arise from the huge growth of the emerging market middle class. From an investment perspective, it’s not only the scale of this growth trend that we find compelling, but also the diversity it presents. We see this theme playing out across a whole range of verticals, from Asian air travel and the rise of financial services, to luxury goods and increases in discretionary spending. Important sub-themes relating to demographic change will also be a notable focus, including health and nutrition, urbanisation and infrastructure spending.”

Geopolitical uncertainty to continue

Sam Morse, Portfolio Manager of Fidelity European Values, said: “The main risks for 2020 remain anchored around geopolitics and central bank activity. Trade tensions rumble on and the Brexit saga remains an important source of uncertainty. A key turning point for investors however has been the Fed ‘pivot’ to ease monetary policy. The European Central Bank has followed suit as evidenced by the September meeting where they agreed lower deposit rates and the reintroduction of asset purchases which should be supportive of equities. In the US, some sectors – notably healthcare – may be negatively affected by politics, with a further derating of health insurers likely if Elizabeth Warren’s prospects in the Democratic primaries further improve, given her support for ‘Medicare for all’ government insurance.”

Stephen Inglis, CEO of London & Scottish Property Investment Management, the Asset Manager of Regional REIT, said: “Our outlook remains positive for 2020 and beyond. The geopolitical uncertainty currently at play will continue in 2020 and undoubtedly present both risk and opportunity for REITs, alternative and equity investment trusts. Regional REIT has extensive experience in dealing with similar property assets through the 2008-2012 downturn where the valuations fell but income was maintained. In fact, income levels increased by 3% over that period, reflecting the resilience of the UK core and core-plus regional office and industrial markets.”

Craig Baker, Chairman of the Alliance Trust investment committee, said: “After a rather tumultuous year filled with geopolitical uncertainty, a challenging growth environment, and a trade war, 2020 looks set to continue a rather choppy course. Despite this uncertainty, equity markets have delivered very solid returns over the last 12 months, bouncing back from their lows in Q4 2018 and reassured by accommodating monetary policies globally.”

Preference for the US

Katie Thorneycroft, Portfolio Manager of JPMorgan Multi-Asset, said: “As multi-asset managers, we position our portfolios in line with our latest macro views and continue to maintain a preference for the US equity market, where we have greater confidence in the growth picture relative to other regional markets, while noting of course that there are attractive dividend yields to be had in other regions of the world. Our outlook for risk assets has slightly improved in recent weeks as geopolitical tail risks have fallen and we have seen early signs of global growth stabilising. Looking at the US, a large part of our portfolios, we expect that growth will move back towards trend in 2020.”


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  1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 362 members and the industry has total assets of approximately £197 billion.
  2. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.
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