Nobody could accuse 2011 of being an easy year for the investment industry, mused the chairman of the curiously named Betelgeuse Investment Funds as he perused the sales figures. Indeed, given the level of uncertainty that had persisted throughout the year, it was a wonder markets had held up as well as they had. It had been difficult to make money, though. Just five of the IMA’s 33 sectors had finished the first 11 months of 2011 in positive territory, even after taking reinvested income into account.
And it had been bond funds that had led the tables, with index-linked gilts taking the top spot. What a contrast to last year, when smaller company and emerging markets funds had held sway. No wonder the platforms were seeing such a flow into the cautious managed sector – not that these funds had made money for investors on average so far this year.
What might the future hold in store, he wondered? With Europe still in disarray, it was hard to be certain but he could not help but think that perhaps next year could be as much of a reversal of fortunes as 2011 had turned out to be.
China, that growing economic powerhouse, had trailed the rankings this year but all the signs were that inflation was coming under control and that a soft landing for the economy could be achieved. Of course, a global depression ushered in by a collapse of the euro would mean that all bets would be off but he still felt this the least likely outcome.
It was not just the state of markets that were likely to be influencing his business in the year ahead. With RDR rushing towards the advice community, he could not help but wonder how the distribution of investment funds might change as the decade developed. Moreover, the range and number of funds continued to grow. No wonder investors found the whole business of choosing which to buy challenging. Perhaps Terry Smith had a point.
The past few years had seen some quite dramatic changes in his industry. Well known and hitherto respected firms had disappeared and plenty of managers that had enjoyed star rankings for their investment skills had found the conditions of recent years tough.
Pushing the rather disappointing figures to one side, the chairman sighed and looked through the glass of his office wall at the serried ranks of managers, analysts and assistants. It was quite a responsibility he had, keeping all these people, with their families and commitments, in gainful employment.
Could next year mark the turning point for investors? So much depended on a disparate group of European politicians working together that nothing could be guaranteed but he took heart from the fact that shares had achieved little in the past fifteen years while valuations must give some support. Moreover, while nervousness persisted, it was significant that the slightest hint of good news tended to bring the buyers out.
Turning back to the sales numbers, he wondered what new challenges lay ahead. More innovation among asset classes, perhaps? New entrants into the retail market? Anything was possible and he retained the natural optimism of someone who had operated in equity markets all his working life. Whatever 2012 had in store, of one thing he was certain. It would be different to the year just ending.
Brian Tora is an associate with investment managers JM Finn & Co