Investors are looking forward to another eventful year in 2017. EQ Investors have put together some of the key considerations from their perspective.
Bank of England to raise interest rates in 2017
After the EU referendum the Governor of the Bank of England, Mark Carney, dropped interest rates and increased liquidity measures. Though this seemed prudent and necessary at the time, 2016 has seen strong employment and decent economic figures with continued inflationary pressures. Next year the Bank may look to increase rates after this bout of quantitative easing.
The risk of a corporate bond sell-off
Despite the recent sell-off bond yields still appear too low. The 10-year Gilt (UK Government bonds) yields about 1.5%, but inflation is expected to be around 2.5% within a year. If inflation expectations prove correct then bond yields could easily spike higher.
After the financial crisis in 2007 cautious investors poured money into corporate bonds. Returns have been handsome as capital values have improved and income has proved reliable. However we are concerned about the lack of liquidity in the corporate bond market. This lack of liquidity will make it difficult to sell in poor market conditions. In the face of this, some corporate bond fund managers have arranged additional financing arrangements to allow them to meet redemptions.
Impact investing goes mainstream
We see increasing numbers of people who want their investments to have a positive effect on society and the environment, while still earning a financial return. Until recently the investment options were quite limited. From our conversations with asset management companies both in the UK & Europe, we expect to see new impact funds launched in 2017, for fixed income and equity asset classes. Given the positive feedback from potential investors we wouldn’t be surprised to see strong inflows over the next twelve months and beyond.
Continued pressure on fund management charges
Active fund managers are under pressure to justify their fees. Initial findings by the Financial Conduct Authority (FCA) show that most active fund managers charge more but do not add any value compared to cheaper, passive funds. The FCA may well flex its regulatory muscle when their final report is published next year.
Evidence shows that investors are already more cost-conscious. Since 2007 assets managed in passive funds have grown 4x faster than active products and now stand at $6tn globally. At EQ we’ve seen a surge of interest in our Low Cost portfolios.
After the year that was 2016
Despite the political upheaval of 2016 markets seem to have taken events in their stride. Few investors have ended up disappointed by their portfolios’ performance. As we look ahead to 2017, plenty of uncertainty awaits. Will markets continue to ride out the storm? Only time will tell. Our overall positioning continues to be defensive. While we cannot predict the outcome of elections, we continue to find what we view as solid investment opportunities.
Sophie Muller is Head of Research for EQ Investors
Like our Facebook Page
Harnessing the Sun: The Far-reaching Benefits of Solar Panels
7 Benefits of Purchasing Sustainable Housing
Our Top Five Sustainable Home Renovations For 2023
6 Ways Eco-Friendly Photographers Can Take Beautiful Natural Pictures
Emerging Research In Seagrass Restoration: What Does The Future Hold?
Sustainable Bites: How To Make Your Diet Eco-Friendly
Coffee Farms & Cloud Forests: Colombia’s New Eco Initiatives
Electric Cars: Are They Worth The Switch?
Maximizing the Efficiency of Deliveries: Strategies for Sustainable Businesses
The Rise of Sustainable Cloud Computing
The Future of Sustainability In The Logistics Industry
Eight Different Eco-Friendly Developments in the Food Industry
5 Key Areas to Look at When It Comes to Business Sustainability
Addressing Leadership Challenges in Green Entrepreneurship
Holding Eco-Friendly Coins is Greener and More Profitable
5 Reasons That Diamonds Can Be Excellent Green Investments
Eco-Friendly Airlines Use Weather Models to Make Safer Flights
Why Should We Invest in Eco-Friendly Homes?
The Rise of Sustainable Cloud Computing
Navigating Towards A Greener Future: Sustainable Practices In Maritime
- Features3 months ago
What is the Eco-Friendliest Option to Wash Your Dishes?
- Environment7 months ago
6 Home Improvements You Can Make to Help the Environment
- Environment11 months ago
How to Ensure Your Home’s Eco-Friendly During Construction?
- Business10 months ago
The Pulp & Paper Industry is Reaching its Sustainability Goals