Fund manager poll

Information technology tipped for the top in 2024.

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According to the annual fund manager poll conducted by the Association of Investment Companies (AIC), Information Technology is expected to be the best performing sector in 2024.

The sector was tipped by just over a quarter (26%) of respondents, followed by Industrials with 19% and Healthcare and Energy both at 15%. The poll was carried out among AIC member investment company managers between 13 and 27 November 2023.

On a five-year view, Information Technology took a more commanding lead with 44% of respondents believing the sector will be the best performing over the next five years, followed by Energy (19%) and Healthcare (15%).

Best performing regions and assets

The UK is predicted to be the best performing region next year, selected by nearly half of respondents (44%), followed by the US (15%) and Japan (11%).

Over the next five years, just under a third of investment company managers (30%) think the UK remains the most attractive region, followed by Emerging Markets (19%), the US (15%) and Europe (11%).

Investment company managers expect small-cap equities to be the best performing asset class in 2024 with 26% of all votes cast, followed by mid-cap equities (19%), large-cap equities and bonds (both 11%).

Where will the FTSE close at the end of 2024?

More than two-thirds (70%) of investment company managers believe global stock markets will rise in 2024, with 15% saying they will fall and the rest unsure. When it comes to the FTSE 100, 65% of investment company managers suggest the index will be above 7,500 compared to 35% who believe it will fall below this level.

Inflation, interest rates and other threats

The majority of investment company managers (78%) believe interest rates have peaked compared to 7% who think there could be more pain to come and 15% who preferred not to give a verdict. However, most managers (59%) think the Bank of England base rate will still be above 4% by the end of 2024.

An overwhelming majority (93%) of investment company managers think inflation will continue to fall over the coming years. However, respondents think this could be a slow, drawn-out process. Only 7% believe the Bank of England will meet its 2% target next year, with 33% suggesting the target will be hit in 2025, 41% in 2026 and 11% in 2027 or later.

Reasons to be fearful (and cheerful)

When asked about the biggest threat to equities over the next 12 months, the most common answer was a recession, cited by 26% of respondents.

The single greatest cause for optimism is interest rates reducing, according to 30% of investment company managers, followed by opportunities in undervalued companies (22%) and cooling inflation (15%).

Annabel Brodie-Smith, Communications Director at the Association of Investment Companies (AIC), said: “With the rise of artificial intelligence and the fast-paced development of cloud-based systems and hardware, it is no surprise that investment company managers have tipped Information Technology to be the best performing sector of 2024 and beyond

“With the rise of artificial intelligence and the fast-paced development of cloud-based systems and hardware, it is no surprise that investment company managers have tipped Information Technology to be the best performing sector of 2024 and beyond.”

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC).


“The UK is perceived to be the most attractive region in 2024 and over the next five years, and the majority of managers are bullish on stock markets. Most managers believe interest rates have peaked and inflation is reducing, though the pace of this may well be slow. The continued threat of a recession remains, along with the risks associated with the war in the Middle East and the impact it may have on oil prices.

“After a difficult year for markets, it’s encouraging to hear most managers are bullish on the short-term prospects for stock markets – although of course no-one has a crystal ball. As always, it’s important for investors to focus on creating a balanced long-term portfolio which meets their needs – with the help of a financial adviser if necessary.”

Please find below comments from investment company managers on the opportunities in 2024.

Global equities

Andrew Bell, Manager of Witan Investment Trust, said: “In 2024, global growth leadership is likely to shift from the US towards Europe and emerging markets, though initially through the US slowing down rather than booming conditions elsewhere. This should be reflected in equity returns, where valuations remain optimistic in the US and over-concentrated, contrasting with modest ratings elsewhere. We expect another year of (modestly) positive returns, as interest rate sentiment improves.

“We are troubled by the risk that the outcome of the US election could be a withdrawal of the US from international affairs, at a time of global tensions and threats to peace and liberty. Although this is not specifically an economic risk, markets are moved by changing risk premia as well as underlying fundamentals and appeasing, rather than resisting, international aggression would be a negative factor.”

Julian Bishop, Co-Lead Portfolio Manager of Brunner Investment Trust, said: “Regarding interest rates and inflation, many of our holdings actually benefit from higher prices. We deliberately seek out investments that provide inflation protection in this way. For example, if Nestle puts the price of a KitKat up 10% and the margin is held steady, profit per KitKat goes up 10%, preserving the company’s earning power in real terms. Similarly, Visa’s sales are a very small percentage of credit and debit card transaction values, which are boosted by inflation. This thought process is integral to the Brunner philosophy, which seeks to build real wealth over time.”

UK equities

Ben Ritchie, Manager of Dunedin Income and Growth Investment Trust, said: “When the going gets tough, the tough get going will be the mantra of 2024. What worked well in the Covid recovery years may well not be the recipe that drives returns in the future. 2024 will most likely be a challenging year but one that favours stock selection and that should be a positive for active managers of all styles.”

Alex Wright, Portfolio Manager of Fidelity Special Values, said: “The biggest risk in 2024 is a US recession and its impact on global corporate earnings. While there is increasing talk of a soft landing, there is considerable historical evidence on the impact of monetary tightening to keep us cautious on company prospects in the near term. The good news is, unlike in other global markets, where this risk is not reflected in high valuations, the valuation of the UK market provides investors a strong margin of safety for this risk, and there are many specific opportunities available today for differentiated stock pickers.”

Iain Pyle, Manager of Shires Income, said: “For 2024, we see risk of a recession based on leading indicators and global market values look high: income is going to be a much more important component of total return in the next five years in our view. In contrast to some markets, we remain very optimistic on the UK given the low valuations for equities and the likelihood that any downturn will be short and shallow and is already priced in. UK mid-cap exposure looks highly undervalued in our view, with many great companies trading at a discount. Market concentration is unlikely to remain at such extremely high levels and, with a five-year view, we are very constructive on fundamentals being recognised in what has been an unloved part of global markets.”

Ken Wotton, Manager of Strategic Equity Capital, said: “We believe the valuation discount between UK listed smaller companies and their overseas and larger peers as well as the discount to private market transaction values offer a compelling opportunity. Elevated takeover activity in UK smaller companies at large premia is shining a light on the exceptional value opportunity available. Unloved sectors such as consumer and financials could significantly outperform as attention returns to this area.”

Simon Gergel, Manager of The Merchants Trust, said: “It’s almost impossible to accurately predict the timing of the market. However, UK equity valuations are near a 20-year low and the dispersion of these valuations is extremely high, meaning there are fantastic opportunities to buy strong, globally exposed businesses that are well financed on very modest valuations. Historically, this has been a good time to invest because the returns you get from investing are often linked to the price you pay for the assets, and currently these prices are very low. One area we are excited about going into 2024 is the building materials and construction area which is quite diversified and we have exposure across a number of parts of the market, everything from housebuilders in the UK, to infrastructure materials in North America. We also like the insurance sector: it is a beneficiary of higher interest rates because insurers take customers’ money and sit on it for a while until they pay out claims. And as interest rates go up, over time they can make better returns on that cash.”

Nick Train, Manager of Finsbury Growth & Income Trust, said: “We keep finding globally significant and competitive UK companies that are valued at a discount to global peers. In the end fundamentals will outweigh poor sentiment.”

Emerging markets and China

Nick Price, Portfolio Manager of Fidelity Emerging Markets, said: “Emerging markets have continued to underperform developed markets. Weakness in China and concerns around geopolitics explain part of this, with both factors posing tail risks that we are scrutinising with vigilance. Nonetheless, the discount at which emerging markets are trading is at odds with the improving fundamental picture in many cases. This is especially the case given that inflation appears to have peaked in many economies, interest rates have started to come down and we are seeing many companies – particularly in China – return capital to shareholders. The strong fiscal position of many emerging economies also stands the asset class in good stead. Unlike many developed countries, emerging markets were largely slow to extend fiscal subsidies during Covid lockdowns. We see lower levels of debt-to-GDP in many emerging market countries, particularly relative to the US, where the near-breaching of the debt ceiling brought the country’s unsustainably high levels of debt into sharp relief.”

Dale Nicholls, Portfolio Manager of Fidelity China Special Situations, said: “Investor sentiment towards China has been weak, so a positive turn here could be a big surprise in 2024. A key area to watch will be the pace of the consumption recovery. Chinese citizens are sitting on record amounts of savings, but consumer confidence and household consumption remain muted so far. Factors driving this could include weaker business confidence, particularly given well-publicised job cuts at the big tech companies and youth unemployment headlines, but also the ongoing property crisis given the weight of housing costs on the consumer balance sheet. From our discussions with companies, we think the worst of the job cuts are behind us, particularly in the tech sector. We think continued improvements in the job market will be crucial for consumption to support growth and it has been encouraging to see the overall unemployment rate start to decline from Q3 2023.”

Nitin Bajaj, Portfolio Manager of Fidelity Asian Values, said: “When negative headlines and weak sentiment prevail, I have been finding more companies in China where good businesses are available with a very good margin of safety. Many of them before the correction were ruled out on my list given the stretched valuations at the time. However, due to the pessimism in China, we are now able to incrementally add to several long-term structural beneficiaries in the consumer space. This includes retail chain drug sellers bolstered by a gradually aging population in China, or leading domestic players in the under-penetrated dairy and sportswear industries. Equally, I remain positive in general on oil and commodities in the mid-term. This is partly driven by the production needs in Asia, as well as favourable supply-demand dynamics globally resulting from less capex allocation in oil exploitation thus less supply versus demand.”

Overseas equities

Alexandra Dangoor, Co-Manager of BlackRock Greater Europe Investment Trust, said: “2023 was another year where the siren calls of a recession were proven wrong, with the predictions once again being pushed to the right. Our view has remained – and continues to remain – that the world economy is in considerably more robust health than commonly understood. Household leverage sits at record lows, with most economies in full employment, while corporate balance sheets are also under-levered versus history, with profit margins close to record highs. Such a position materially alters the reaction function of households and businesses to a downturn, and we believe we are heading towards the softest of soft landings, particularly in the US, as disinflationary forces continue to show themselves in official inflation data.”

Joe Bauernfreund, Manager of AVI Japan Opportunity Trust and AVI Global Trust, said: “Broad equity markets in general will continue to struggle to make significant gains in 2024. However, there are pockets of good value and investors who focus on fundamental stock picking could do well. Corporate activity will also be a potential source of returns and investors able to actively engage with companies will benefit from idiosyncratic sources of return.”

Nicholas Price, Portfolio Manager of Fidelity Japan Trust, said: “Japan’s delayed reopening and the return of inbound tourists are supporting growth in consumption and services demand. At the same time, the economy is transitioning to a moderately inflationary state, as companies are finding it easier to raise prices and are increasing wages.

“Japan’s technology and materials sectors hold a lot of promise. Globally competitive companies in semiconductor equipment and electronic components are trading on compelling valuations as we approach the trough of the cycle. There are also niche chemicals companies that command dominant positions in their global markets yet continue to fly under the radar. Another area of the market that I would highlight is the mid- and small-cap growth space, an often overlooked segment that is trading on cheap valuations.”

Sam Morse, Portfolio Manager of Fidelity European Trust, said: “In terms of surprises for 2024, we may have already entered a period of stagflation; a time when nominal economic growth will not result in real economic growth, when nominal gains in the stock market will not compensate investors for their loss of purchasing power. Our strategy to combat this will be to identify businesses with strong pricing power and to avoid companies with stretched balance sheets. ‘Higher for longer’ may also continue to pressure long-duration growth (the denominator effect) and we will be cognisant of that in maintaining our balanced approach.”

Frontier markets

Emily Fletcher, Co-Manager of the BlackRock Frontiers Investment Trust, said: “We continue to like Indonesia and the country is currently the largest absolute weight in the portfolio. We are positive on the country’s ability to grow, due in part to beneficial policymaking. For example, by banning the export of raw ore, Indonesia has increased the value of its mineral exports, enhanced its domestic processing and refining capabilities, and created more economic opportunities for its people. We therefore remain positive on their ability to grow the value added from their nickel exports. We are also positive on other ASEAN markets as we believe many of these countries stand to benefit from increased geopolitical tensions worldwide. These countries will likely maintain trade relations with both the West and the East, and can therefore benefit from the shifting in global supply chains away from China.”

Craig Robert Martin, Manager of VietNam Holding, said: “In 2023, we have remained nimble in decision making, cautious in timing the market and engaged with the portfolio companies. Our ESG efforts have been further refined and expanded: we sponsored the inaugural ESG Investor Conference in Vietnam in May this year. Looking ahead to 2024, we think fundamentals will matter more. After a difficult year for retail, there is a good chance of a rebound for market champions.”

Dien Vu, Manager of VietNam Enterprise Investments (VEIL), said: “Vietnam has actually had a relatively low inflationary environment (3.6% year-on-year) allowing for interest rates to be lowered, with four rates cuts in the first half of 2023. This has helped stimulate both the economy and liquidity in Vietnam’s equity market, supporting gains in the Vietnam index in the year to date.

“The core positions in the portfolio are long-term holdings, many of between 10 and 27 years, with whom our ESG framework and expectations have long been communicated. That said, as Vietnam continues to open itself up to an increasingly global investor base which requires greater accountability from its investments, the benefits of strong governance and disclosures are clearer than ever. The portfolio managers work closely with VEIL’s portfolio companies to enhance and demonstrate their commitments on a variety of issues; to give one example, the fairness of employee share option plans to ensure they strike the right balance between incentivising employees and aligning shareholder interests.”


Jason Baggaley, Manager of abrdn Property Income, said: “2024 should be a more positive year for real estate with interest rates beginning to decline and the cost of debt falling. Logistics remains our favoured sector for the trust, with continued rental growth expected, but as in all sectors the returns will depend on asset quality – the recovering market will favour quality over secondary assets.”


Jean-Hugues de Lamaze, Manager of Ecofin Global Utilities and Infrastructure, said: “After two years of de-rating, listed infrastructure, particularly utilities exposed to the energy transition, are trading at their lows, notably relative to their private valuation. Growth and earnings outlook have only improved over the period. We expect equity markets to account for this and revalue the universe now that interest rates seem to have peaked.”

Private equity

Helen Steers, Partner at Pantheon and Co-Lead Manager of Pantheon International (PIP), said: “Pantheon International’s actively managed, ‘all-weather’ portfolio is weighted towards fast-growing and resilient sectors such as information technology and healthcare, where growth is driven by long-term secular trends such as increasing automation and digitalisation, and ageing demographics. PIP has limited exposure to consumer discretionary businesses that are more sensitive to economic downturns.

“PIP has a track record of outperformance, which spans more than 36 years and multiple economic cycles. While we are not complacent about the current macroeconomic environment, PIP’s flexible investment approach, its strong financial position and the high quality, well diversified nature of its portfolio, provide us with the confidence that PIP will continue to outperform its public market benchmarks over the long term.”

Venture capital trusts (VCTs)

James Livingston, Partner at Foresight Group, which manages the Foresight VCTs, said: “In the past year, we launched a sustainability platform that was developed by Salesforce and PwC. The platform enables our portfolio companies to monitor, track and report on their sustainability progress, their positive social impact through job creation, and how they have implemented strong and fair governance frameworks. However, sustainability is at the heart of what we do and for many years we have worked with our portfolio companies, right from the first meeting, to put in place sustainable best practices, and at exit, we ensure a framework is in place to allow this to continue.”

- ENDS -

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