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The tips are down

I have always wondered whether fund managers, top quality IFAs or industry commentators such as Mark Dampier and Justin Modray, who I respect highly, are best at predicting where the most attractive future investment returns are to be found.

So, to me, the third annual poll by the Association of Investment Companies and IFAP to gauge the investment views of fund managers and IFAs for 2007 is interesting reading. The intellectual weight of 170 IFAs and 31 fund managers is not to be sniffed at. But who should we believe?

Blue chips are tipped as the sector most likely to outperform in 2007 by the biggest proportion of fund managers while IFAs opt for smaller companies. Fund managers also express confidence that equities are much more attractive than property and bonds, something that IFAs have yet to be persuaded on.

IFAs tip emerging markets as the best performing region for 2007 while fund managers favour Japan. The greatest causes for optimism among both groups are corporate profitability, balance sheet strength, merger and acquisition activity, opportunities in the Far East and a belief that inflation is under control.

I would like to see this research compared with previous years to see which group is more accurate.

With the introduction of UK real estate investment trusts earlier this month and the accompanying press coverage and new property fund launches, will property remain the favoured asset class as shown over the last few months by the Investment Management Association statistics on new business flows?

Seventy-seven per cent of fund managers expect equities to outperform property and bonds this year but only 55 per cent of IFAs agree. Twenty-eight of IFAs expect property to outperform – a view which no fund manager shares.

In fact, 12 per cent of IFAs expect property to be the top performing sector overall this year. No fund managers think property will be the top sector in 2007.

As a result of IFAs’ positive view of property, huge amounts of marketing expenditure will be thrown at the launch of property funds. A full armoury will cover UK, European and global property. So over to Mark and Justin to guide us toward the most attractive property funds among the plethora available.

To look at the whole retail-facing property investment piste is something that fund managers tend not to do and in commercial terms why should they? How many times have you heard a fund manager saying to IFAs that now is not the time to invest in their funds? I can name one or two instances over the last 25 years when this has happened but I hold great respect for those that have done so.

What other areas are there where IFAs think differently from other groups in the financial services industry? The raft of regulations due this year bringing in principles-based regulation is the most pressing challenge for IFAs, from treating customers fairly to the mighty Mifid. But the FSA says making a successful transition to a more principles-based regime will prove a big win for everyone. Most IFAs I speak to are providing client services way beyond what TCF will expect. The banks, however, remain a long way behind in knowing who their customers are, never mind treating them fairly.

Many people think that reducing the amounts of commission paid to IFAs will be a huge area this year. However, I believe the IFA sector will adapt to a combination of fees and smaller commission amounts without too much palaver and the number of IFAs since depolarisation will continue to rise.

What else will rise? It is predicted by both IFAs and fund managers that the FTSE 100 will end the year in the 6,500-7,000 range. Watch this space.

Kim North (kim@tech is director at Technology & Technical.


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