Fund manager poll: Renewable Energy Infrastructure tipped as top performer for 2022

UK expected to be best performing region next year.

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UK expected to be best performing region next year.

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Investment company managers have tipped renewable energy infrastructure to be the best performing asset class of 2022, 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 and 8 and 30 November 2021.

Renewable energy infrastructure attracted 18% of managers’ votes, with mid-cap equities following close behind with 17%. When asked to predict the best performing region in 2022, a quarter (25%) selected the UK, while a fifth (20%) chose emerging markets. There was also support for Asia Pacific excluding Japan and the US (both at 15%).

On a five-year view, managers’ favoured regions are similar. The UK, Emerging Markets and Asia Pacific excluding Japan are seen as offering the most attractive medium-term opportunities, each receiving 20% of the votes, followed by the US (17%).

Inflation and interest rates

Managers’ greatest fear is interest rates rising, with 20% seeing this as the biggest threat to the stock market in 2022. Nine out of ten managers believe interest rates will go up in 2022. Linked to this, the second biggest threat in 2022 is a rise in inflation (17%).

However, an extended period of high inflation is seen as a long shot. Only 15% of managers expect inflation to top 5% over the next three years, while 65% reckon this is unlikely or very unlikely.

Best performing sectors in 2022

Alternative energy and REITs are the two stock market sectors expected to perform best in 2022, each receiving 12% of managers’ votes.

On a five-year view, managers think Software and Computer Services presents the most attractive opportunities (35% of respondents selected the sector).

Where will the FTSE close at the end of 2022?

Investment company managers are optimistic on the prospects for global stock markets in 2022, with 75% believing they will rise versus 10% expecting a fall. When asked about where they think the FTSE 100 will close at the end of 2022, 50% of managers thought it would close between 7,500 and 8,000 – higher than its current level of around 7,200. Only 5% thought it would close below 7,000 and an optimistic 5% predicted a close above 8,000.

Causes for optimism

Managers believe the greatest cause for optimism in 2022 is the threat from COVID-19 receding, gaining 21% of their votes. However, this survey was completed before the new variant, Omicron, was identified. The second greatest cause for optimism was supply chain problems receding (19%), followed by technology driving economic growth (16%).

Annabel Brodie-Smith, Communications Director at the Association of Investment Companies (AIC), said: “Despite the challenges of 2021, investment company managers are optimistic about the prospects for markets in 2022, believing the threat from COVID is receding and supply chain problems are easing. Following the focus on climate change at COP26, it’s encouraging that renewable energy is tipped to be the best performer in 2022.

“The joint best performing stock market sectors are expected to be alternative energy and REITs. The latter benefited from the increase in online shopping and this year’s opening up of the economy. The UK is tipped as the most attractive region next year, with half of managers believing the FTSE 100 will close between 7,500 and 8,000. Managers clearly remain concerned about the spectre of inflation, with higher inflation and interest rates being their main concerns for 2022.

“Of course, no-one has a crystal ball. Investors should focus on investing for the long term by creating a balanced portfolio which meets their needs – and, if in doubt, consult a financial adviser.”

Manager comments on the outlook for 2022 and beyond

Gervais Williams, Co-Manager of The Diverse Income Trust, said: “In 2022, we believe the current slowdown in the Chinese economy will prove to be structural in nature. Just as happened in Japan in 1989, China’s giant debt burden, combined with its aging demographics, will lead to an abrupt cessation of its growth trajectory, in our opinion. Alongside, long-dated bond yields – which are now close to zero – may start to reverse the favourable valuation trend of recent decades.

“Companies with negative cashflow that are reliant on the stock market for funding, or those that are over-levered, could be particularly vulnerable. Meanwhile, companies that generate cash surpluses each year could acquire over-levered, but otherwise viable, businesses from the receiver. So, even if things get worse, sometimes their ability to generate plentiful cash might actually improve.

“The US is a stock market dominated by high-beta stocks, and the equity-income dominated UK stock market is a low-beta one. As the challenges above become more apparent, we anticipate that a long period of high-beta underperformance and low-beta outperformance could arise. Over the next couple of decades, the UK could outperform substantially.”

Lee Qian, Manager of Keystone Positive Change Investment Trust, said: “We don't make any attempts to predict the direction of bond yields or markets. Rather, we try to understand what the next waves of innovation might be and what implications they might have for society and our planet over the next 5, 10 or 25 years. It feels as if we are on the cusp of several waves of innovation and transformation, including the energy transition, electrification, a material revolution, genetics, AI and quantum computing. Each of these waves in isolation are exciting; in combination, they could be incredibly powerful. 

“Our focus is on identifying the wave makers – the companies driving change and disrupting the status quo – and to play our role in helping the development and scaling of innovative solutions to global challenges by providing long-term and supportive capital, something which has sadly become increasingly scarce over the years. By doing so, we step up to our responsibility in steering towards a more sustainable and inclusive future and can identify exceptional businesses that will deliver attractive returns for shareholders.” 

Andrew Bell, Manager of Witan Investment Trust, said: “Assuming that (despite the new Omicron variant) the world is close to being able to live with COVID, 2022 should see a sustained period of reopening, economic recovery and gradual resolution of the supply chain frictions caused by politics and the pandemic. Equities where earnings exceed expectations should have a good year.

“Inflation is likely to recede from an early 2022 peak but may well settle at higher levels than pre-pandemic. This is partly due to supply chains being redesigned to prioritise ‘just in case’ rather than ‘just in time’, partly because the ‘build back better’ mantra now seeks faster growth, even at the expense of somewhat higher inflation and, importantly, because the up-front investment required to combat climate change for the benefit of future generations needs to be sold to the current electorate. This will require maintaining a positive growth backdrop and funding it with long-term borrowing rather than tax rises.

“For contrarians, the UK and emerging markets appear widely disliked and lowly valued. For the longer term, I would bet on the US growing faster than other developed economies, but its stock market reflects more good news than others and could be a wallflower in 2022. I expect commodities, renewable energy and healthcare to do well.”

Inflation and interest rates

William Meadon, Manager of JPMorgan Claverhouse Investment Trust, said: “For 2022, one of the risks we are monitoring closely is the path of inflation. Against this backdrop, income investors should look at companies with strong pricing power to protect their portfolio from inflation risks.

“It is unclear whether the market overall will show dividend growth in 2022. In this environment, the advantage of investing in investment trusts which can draw on reserves to maintain dividend payments, is clear.”

Nick Brind, Co-Manager of Polar Capital Global Financials Trust, said: “Central banks globally have started raising interest rates at the fastest rate since before the global financial crisis. Against this backdrop, financials, particularly bank shares, have been outperforming as they are one of the biggest beneficiaries of rising interest rates.

“With inflation hitting levels not seen in ten or more years we would anticipate interest rate expectations continuing to rise, which if correct should result in the sector continuing to outperform. This could be underpinned by the increased capital return as banks accelerate the return of excess capital built up during 2020.”


James Douglas, Manager of Polar Capital Global Healthcare, said: “The near-term outlook for healthcare, and indeed the broader markets, may well be carrying some uncertainty due to the COVID-19 virus, but we have a high level of conviction that the healthcare industry will continue to innovate, work on improving access to care and use technology to drive efficiencies across the healthcare ecosystem.”

UK equities

Simon Gergel, Manager of The Merchants Trust, said: “Despite the risks from supply chain disruption, COVID-19 variants, rising inflationary pressures and higher taxes, the UK economy should continue to grow at a good pace in 2022 as interest rates stay low, the government spends on infrastructure, and consumers gradually return to more usual activity levels.

“The UK stock market is one of the cheapest in the world and remains highly polarised. This is providing excellent opportunities for stock pickers to identify strong businesses, trading at attractive valuations, which can deliver a high income and good total return over the long term.”

Alex Wright, Portfolio Manager of Fidelity Special Values, said: “UK equities remain significantly undervalued compared to global markets and reasonably valued in absolute terms. This has been reflected in a meaningful uptick in M&A activity, which has been a key contributor to performance for our funds. We are likely to see more bids if valuation discounts compared to overseas companies do not close. 

“While the UK market has looked cheap over the past five years, the key differentiator compared to prior years has been that fundamentals on the ground have been strong. The removal of the Brexit uncertainty and the country’s swift vaccination rollout have contributed to the improved outlook.”

James Livingston, Partner of Foresight Group, said: “We expect the UK M&A market to remain buoyant in 2022, driven by the continued strong supply of private equity capital and interest from the US in UK assets. Throughout 2022, we expect to see a continuation of the demand for technology and healthcare assets, and there to be a focus on low carbon businesses. The UK government’s levelling-up agenda should see an increase in capital available for early-stage businesses in regions across the UK.”

Dan Whitestone, Manager of BlackRock Throgmorton Trust, said: “There remains an abundance of investment opportunities for us on both sides of the book and several new long and short ideas have entered the trust in recent months. We would also note that it seems company and industry fundamentals and the subsequent dispersion in financial outcomes in company updates are having a greater impact on share prices, which is a trend we believe will continue. We retain our high conviction in the fundamental strength of many of our differentiated investments and the power and enduring nature of many secular trends we are witnessing right now.”

Global equities

Zehrid Osmani, Manager of Martin Currie Global Portfolio Trust, said: “We continue to see a favourable backdrop for equity markets, as a result of ongoing loose monetary policies (even if they are on a path towards normalisation over the next two to three years), a low real interest rates environment, continued significant and still rising fiscal support, and a more prolonged positive economic cycle supported by sizeable infrastructure spending, given the more prolonged nature of such spending plans. We would therefore favour more cyclically exposed sectors and regions globally. Importantly, we believe that we are likely now moving from the recovery into the expansion phase of the economic cycle, where we would expect a broadening of market leadership and more emphasis being brought back towards stock picking.

“This will require a focus on companies that are able to deliver good earnings growth profiles and steady returns over sustained periods of time, rather than simply based on a sharp rebound from lows such as those seen in 2021 as a result of the post-pandemic crisis recovery. The shift in economic cycle from recovery into expansion is typically accompanied by a shift from accommodative monetary policies towards normalisation, which can usually bring a period of increased market volatility as interest rate expectations adjust.”

European equities

Stefan Gries, Co-Manager of BlackRock Greater Europe Investment Trust, said: “Looking forward to 2022 and beyond, it is important to stay selective, taking an approach that allows us to navigate the current environment while also capitalising on some of the exciting long-term investment opportunities that Europe has to offer.

“In our mind those include the fast pace at which our economies are digitising, decarbonisation of transport and the shift to electric vehicles, as well as the shift to more renewable fuels and ambitious targets to modernise our existing building stock. The European Union is committed to these future-proofing development projects, creating long-duration spending streams investors can gain exposure to in portfolios.”

Japanese equities

Nicholas Price, Portfolio Manager of Fidelity Japan Trust, said: “We remain broadly positive on the outlook for the Japanese market as we move into 2022. Valuations remain supportive and compare favourably with those in other developed markets such as the US, while earnings momentum is strong.

“A delayed recovery in the manufacturing sector due to COVID-19 restrictions and supply disruptions means that some of the earnings recovery has been pushed into the first half of 2022. While there was some weakness in the first half of fiscal 2021, we expect corporate profits to be quite strong in the first six months or so of next year. The outlook for the second half of 2022 is less clear with the potential for interest rate rises. A potential negative would be high and rising energy prices leading to an economic slowdown globally.”

Asian equities

Nitin Bajaj, Portfolio Manager of Fidelity Asian Values, said: “In Asia, small-caps have materially outperformed large-caps in the last 12 months and since the beginning of 2020. This looks like a partial mean reversion from what happened between 2016 and 2020 when large-cap stocks significantly outperformed small cap stocks, especially small-cap value stocks. 

“Over the last few years, the valuation differential between large growth stocks and small value stocks had reached an extreme last seen in tech bubble of 1999/2000. Hence, there was an expectation that investors would rotate out of growth stocks and into value names in the hope that value would benefit from an economic recovery.

“This has played out in the Asian large-cap space so far in 2021, but not to the extent we expected in the Asian small-cap segment. Valuations remain very bifurcated and many small-cap value stocks continue to trade at significant discounts relative to large and small growth companies. Our sense is that we may have quite a way to go on this journey as historically small-cap value stocks, in aggregate, have had a good track record of growing earnings faster than small-cap growth stocks.”

Canadian equities

Dean Orrico, Manager of Middlefield Canadian Income Trust, said: “Canadian equities have outperformed most developed markets in 2021 and we expect the country’s economic recovery to continue well into 2022. Earnings growth is gaining momentum in a number of sectors including real estate, financials and energy. In addition, the extreme asset price dislocations observed during the pandemic still have room to moderate with valuations for Canadian market sectors significantly lagging their US counterparts. Growing concerns about the persistence of inflation could support higher North American interest rates as central banks begin quantitative tapering programs and interest rate hikes.”

Emerging markets equities

Ross Teverson, Manager of Jupiter Emerging & Frontier Income Trust, said: “In a world where valuations for some asset classes look very high relative to history, the opposite holds true for many companies and sectors within emerging and frontier markets, despite the potential for strong long-term growth.

“While many smaller emerging and frontier markets remain a long way behind developed markets and China in terms of their vaccine programs, we saw a marked acceleration in vaccinations during the second half of 2021, which bodes well for a continued recovery in economic activity in 2022. As investors continue to look past the impact of the pandemic, we expect that the scope for operational recovery and potential for a rerating from current valuations will be positive drivers of equity returns.”

Matthias Siller, Co-Manager of Barings Emerging EMEA Opportunities, said: “In the short term, we expect global markets to remain volatile as investors closely monitor progress on containing COVID-19 outbreaks across many countries. There are also existing challenges centred on inflationary pressures and monetary policy tightening.

“Despite short-term headwinds, there are reasons to be optimistic for what we call Emerging EMEA, the developing markets across Eastern Europe, the Middle East and Africa. We have continued to see a recovery in earnings growth, underpinned by the strength of the consumer. High disposable income growth across most parts of the region, combined with ongoing efficiency gains, will continue to drive earnings over the medium term. This seemingly disparate region also possesses a degree of resilience against inflationary pressures, as rising energy prices have helped support economic activity and stock market performance across some of its markets.”

Andrew Ness, Co-Portfolio Manager of Templeton Emerging Markets Investment Trust, said: "Looking towards 2022, we believe emerging markets offer a compelling investment opportunity. The macro and fundamental backdrop is supportive, with debt levels much lower and equity valuations cheap versus developed markets. In addition, emerging markets companies have been generating more free cash flows versus developed markets, which could potentially contribute to an upward re-rating. For these reasons we remain bullish on emerging markets in the longer term, even as we are mindful of some near-term risks such as the recent Chinese regulatory crackdown and further virus outbreaks."

Nick Price, Portfolio Manager of Fidelity Emerging Markets, said: “2022 could prove to be a challenging year as property and construction-related activities slow. However, sentiment has been very weak with a lot of bad news already reflected in prices. China’s economy appears robust – exports have benefitted as consumers spend on goods, not experiences and travel, and there are some encouraging early signs that China may be bottoming out. 

“More broadly, we see potential for negative surprises emerging from a less certain political backdrop. In Brazil, for example, a convoluted political scenario adds to the uncertainty around the economic recovery – a risk we are unlikely to embrace.”


Dion Di Miceli, Funds Corporate Adviser at Gravis Capital Management, said: “The volatility in equity markets serves as a reminder to investors of the considerable benefits offered by non-correlated assets which can provide stable, dependable returns through turbulent market conditions. It is our belief that this will be a key driver for increasing investor allocations – both retail and institutional – to ‘alternative’ investments through the listed fund structure. This has already been seen through 2021, with almost £12 billion of equity raised for a broad range of listed fund investments offering investors access to non-correlated returns, from infrastructure through to alternative real estate opportunities.

“In addition, we believe investors will increasingly differentiate between ‘green’ and ‘brown’ investments. As a long-term investor investing in a wide range of companies, sectors and countries, Gravis believes that integrating environmental, social and governance (ESG) considerations into investment management processes and ownership practices can help to create more successful and sustainable businesses over the long term and generate enhanced value for our clients and society at large.”

Stephen Inglis, Manager of Regional REIT, said: “Real estate can often be seen as an early indicator of direction, confidence and growth, and the market continues to see IT firms snapping up office space, with Apple being the latest. Having initially let two office floors in the City, it is now expanding to five office floors. Historically, as the investment volumes have increased in central London, the regions have followed. This is no longer the case. For September, Savills reported yield compression in the regional office market with no change in offices within M25.

“The shadow of inflation continues to tip cash currently sitting on the side-lines to seek shelter. Regional offices will thrive.”

Alex O' Cinneide, CEO of Gore Street Capital, said: “We see alternative energy and energy transition as sectors which will continue to thrive against the backdrop of the current economic and political climate.

“Companies which retain flexibility to negotiate supply chain constraints will secure competitive advantage as bottlenecks and disruptions appear to be re-emerging. We place strong importance on participants being able to leverage and embed relationships with stakeholders throughout the supply chain.”

Bill Nixon, Managing Partner of Maven VCTs, said: “In our view, there have been encouraging levels of economic recovery in the UK in recent months, and we remain cautiously optimistic that there will be continued recovery both domestically and in key export markets. Notwithstanding the human and short-term economic impact of the pandemic, including staff dislocation, supply chain disruption, and raw material cost price inflation, the SME sector hasn’t seen a lack of available capital. VCTs continue to play an active and vital role in supporting some of the brightest emerging companies across the UK, investing in a wide range of both private and AIM-listed businesses.”

Tim Levene, Manager of Augmentum Fintech, said: “In 2022 we expect investors to continue to increase their allocations towards private assets, tapping into the ongoing trend of technology companies staying private for longer. Over the last 12 months we have seen unprecedented levels of investment in the UK and mainland Europe from the US and Asia, particularly in fintech, and there are no signs of this slowing as we move into the New Year.”

Evy Hambro, Co-Manager of BlackRock World Mining Trust, said: “We believe the outlook for mined commodity prices remains robust, whilst mining shares offer attractive value. Recovering global economic growth, accommodative monetary policy, rising government spending and increased focus on green capital investment all point towards strong demand. Meanwhile, supply is constrained following years of capital discipline from the producers and we are seeing no signs that this is set to change.”



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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 358 members and the industry has total assets of approximately £274 billion.
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