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Adviser Fund Index – Sinking like a brick

Sentiment towards commercial property has taken a dramatic downturn among the Adviser Fund Index panellists, according to the latest AFI survey.

Seven out of 10 now expect underperformance from the asset class although just 27 per cent of respondents expect property to produce lower returns than cash, equities and bonds over the next 12 months.

Origen investment man-ager John Monaghan says he is operating a half-weighting to property in the firm’s discretionary portfolios and will not be increasing the allocation in the near future.

He says retail investors will also be wary about coming back to the sector, at least until next year.

Monaghan says: “There was so much marketing on property and managers were saying ‘buy bricks and mortar – it will never go down’. It was unbelievable.”

But while most panellists are downbeat on British property, some, including Dennehy Weller managing director Brian Dennehy and Bentley Jennison Financial Management investment director David Wynn, see signs of a possible recovery.

Wynn says: “International property managers are viewing the UK as good value. I take some comfort from that.”

The panellists are also less bullish on the one-year outlook for equities.

Stocks received unanimous support from the respondents in last year’s survey but just six out of 10 now expect equities to outperform. Much of this uncert-ainty centres on the outlook for the US economy. All the panellists expect the US to suffer a technical recession this year (two consecutive quarters of negative GDP growth) and two respondents say it is “very likely”.

Within equity markets, the panellists are upbeat on the short and longer-term prospects for Asia Pacific excluding Japan and the emerging markets.

A combined eight out of 10 respondents expect the two regions to outperform other markets over both one and three years.

The panellists are partic-ularly positive on the out-look for GDP growth in China and India over the next 12 months – the countries received five selections each while none of the panellists forecast strong growth in America, Britain, Europe or Japan.

Short-term sentiment towards Japanese equities has worsened since last August, when just one respondent out of 16 expected Japan to underperform over the next 12 months. That figure has risen to four out of 10, the most of any market.

Over the longer term, the panellists are most bearish on Britain, with four resp-ondents forecasting underperformance over the next three years.

The questionnaire was compiled and conducted by Fund Strategy and Financial Express and was sent to all 19 AFI panellists on March 14.

As at April 8, 10 of the 19 panellists had completed and returned the questionnaire and the survey results are based on these responses.

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Positive feedback

Let’s get over those gloomy winter nights and open our eyes to look at spring which is doing its best to raise spirits. Birdsong is waking us all and, on my morning walk with my dog Max, I have been interested to see daffodils, tulips and now bluebells popping up in gardens and riverbanks. The golf clubs have even had an airing (on the driving range, of course) before seeing the green grass of a proper golf course when the sun gets higher in the sky.

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