What will be the best performing asset class this year?

Three investment managers give their views...

Laurence Boyle

Fund director, WDb Assetmaster

Last year has been another difficult one for equity markets with the turmoil created by the problems of the eurozone leading investors to safe havens assets. But which asset classes will outperform this year? On our bullish outlook, when we get a credible eurozone solution, emerging markets appear to offer an excellent opportunity. Many emerging markets have underperformed for some time as concerns raised about inflationary pressures have forced interest rates higher.

However, slowing global growth and falling commodity prices mean inflation has, or is, close to peaking and already some emerging market countries are beginning to cut rates. In addition, growth in many of these countries remains well above their developed counterparts as the increase in domestic consumption helps to insulate them from external forces.

Also, the sell-off over last year's summer months has left many emerging markets trading on extremely attractive multiples with some even close to 2008 lows. It is interesting to note it was these regions that led the recovery in markets following the collapse of Lehman Brothers.

Meanwhile, 2011 saw the gold price rise by around 25% but many gold equities have fallen in value, leading to a large disconnect building between the asset classes. Further quantitative easing is likely, fuelling inflationary concerns, central bank buying, low interest rates and further uncertainty – all appear to offer support for gold at current levels.

With many analysts’ expectations for gold miners based on a gold price of around $1,200, profits may well exceed current estimates and lead to a series of upgrades, pushing share prices higher. Falling oil prices should also help drive production costs lower, increasing profitability further.

David Hambidge

Investment director, pooled funds, Premier

With interest rates in the developed world likely to stay at – or close to – their current miniscule level for the foreseeable future, we believe most income-producing assets are likely to continue attracting interest from investors over the next 12 months. We continue to prefer equities over fixed income securities and believe that, following several difficult years, the outlook for the UK equity income sector is brighter now than it has been for some time.