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Emerging funds and cash offer the safe options

Headlines are struggling to keep pace with volatile market movements as investors take flight because of fears over the global economy.

In the eurozone, sovereign debt problems are growing more complex as politicians fail to agree on funding decisions, adding to concerns that the crisis will not be resolved and that struggling countries could ultimately default on their commitments.

While most commodities have slumped in value, the gold price continues to set record highs. Last week, it reached $1,920 an ounce.

Gold is traditionally seen as investors’ preferred safety option in turbulent times but Hargreaves Lansdown head of research Mark Dampier says there are other avenues worth considering.

He says: “I have been a big fan of gold in these situations for a number of years, as it is the natural place to be but there is no such thing as a safe haven. There are a few other options. I also think the entire asset model has gone up the spout as it is not prepared efficiently.

“The safest place at the moment is cash, which is something I have been suggesting to clients and even hold personally. Absolute return scenarios have also been worthwhile because they have made money as markets have fallen.”

Eurozone concerns have grown, with questions surrounding the commitment of bigger European economies to the single currency refusing to dissipate.

Germany, seen as one of the rocks of the eurozone because of its relative resilience to the region’s debt woes, delivered a shock when German chancellor Angela Merkel saw her party defeated in local elections in her home region of Mecklenburg Western Pomerania.

However, while the eurozone is providing a troubled backdrop, there are other markets that still look attractive, according to AFI panellists.

City Asset Management investment analyst Stuart Fox says he still has high confidence in emerging markets and thinks that Asia in particular offers attractive fundamentals.

He says: “Investors are looking at well known safe havens such as gold, with other options like the Singapore dollar, Norwegian krone and the Swiss franc also being popular, but investors are not comfortable putting on any large bets.

“We think the long-term fundamentals for emerging markets are very strong. We are particularly keen on Asia, especially China, which we favour over Russia or Brazil, which are slightly more volatile”.

Killick & Co partner Mick Gilligan says: “It is worthwhile to look at long/ short equity funds, which are making money even when the market falls.

“There is the likes of the Liontrust European absolute return fund, which takes a long position in companies with a good cashflow and short positions in companies with a poor cashflow.”

Data supplied by Financial Express


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