By Ruth Alexander The UK market is expected to perform well in 2001, after two years of sideways mo...
By Ruth Alexander
The UK market is expected to perform well in 2001, after two years of sideways movement, according to Nicola Horlick, joint managing director at SG Asset Management.
Speaking at the FundsNetwork industry forum, on 21 November, Horlick said the past two years has been a difficult time for equity investment in the UK market. She said SG's portfolios have been angled towards defensive stocks as a consequence.
She said: "We are, however, much more positive on the market for 2001. Interest rates should fall, as should the oil price, which means the market will do better.
"But inflation is very low which means there will be no great returns from the market. There will be less boom and bust over the next 12 to 15 months, and we must get used to lower returns."
Horlick predicts the market will see a 10% total return next year. She said 2000 will show a negative return, or possibly a slight positive if there is a rally at the end of the year.
SG Asset Management is presently neutral to underweight in technology. Having been overweight in oil in recent months, the group is now moving underweight as it predicts a fall in the price of the commodity. SG Asset Management is also moving to an underweight position in pharmaceuticals.
Horlick said the group will be investing more in cyclical areas such as building, chemicals and engineering going forward.
Horlick is positive on the outlook for Europe. She said inflation rates are a problem, although a fall in the oil price and the recovery of the euro will take the pressure off inflation.
The group believes that while Italy's market is looking good, Germany remains a problem and the group is underweight that country.
Horlick said: "However, Europe is the best performing major market and I still see further momentum there. There is also a need to finance pensions in Europe, which will push people towards equity investment."
SG Asset Management has increased its size 34-fold since its inception in the first quarter of 1998. Horlick said: "Several members of SG's management team have worked in fast-growing companies before. So we know the pitfalls to avoid.
"We have closed our doors to institutional business in the past due to the speed of the company's growth, and we would do so again. We want our company to grow quickly, but it is important that it is built on firm foundations."
SG Asset Management undertakes both stock research and sector research before deciding on asset allocation. Companies invested in must demonstrate a quality of accounts, a healthy cash-flow versus profits and strong management.
According to Horlick, a company worth investing in has a powerful industry position and significant pricing authority.
In order to achieve consistent performance, which Horlick said is crucial, SG employs a team approach to investing and undertake a regular peer review.
SG aims to avoid surprises by setting up risk parameters and regular monitoring of stocks. Funds are managed according to client guidelines and prescriptive systems that control risk.
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