With markets still wavering, the Isa season off to a slow start, advisers, investors, fund managers ...
With markets still wavering, the Isa season off to a slow start, advisers, investors, fund managers and providers alike are all still anxiously awaiting signs that the market direction will head consistently upwards.
Capital preservation is all that intermediaries appear to be occupying themselves with these days and there is no telling what a third year of falling markets would do to their clients' already shaken confidence. On top of this, the annual publication of the Barclays Capital has refuted the general belief that in the long term, equities provide the greater return.
The study's figures show that the equity risk premium, or more simply put, the excess return that an investor earns from putting money into the equity market as opposed to gilts, comes at some risk. In short, the 10-year risk premium on equities was just 0.6%. The position for equities was even worse in comparison with corporate bonds, which outperformed equities by an average of 1% per annum.
In a low inflation environment most fund managers see equity returns coming at a lower rate than in the past 10 years while bonds seem set to receive greater support from pension funds switching into fixed interest.
As depressing as this picture is and as bleak as it looks for the traditional bastion of capital growth, the equity market, the market has been known to adapt before.
But for intermediaries this shows that the use of asset classes outside equity funds has to be used to a greater extent.
Since the end of 1999 to the 22 February 2002, the FTSE All-Share has fallen 20.34%, the S&P 500 has fallen 14.09% in sterling terms while the Bloomberg European 500 index has fallen 23.56%. At the same time cash would have provided returns in the neighbourhood of base rates, which over that time period have ranged between 6% and 4%. Property, according to the Salomon Brothers UK property index, has risen 5.52% over the period.
Bonds have also been well placed in recent months, outperforming equities, with the average fund in the two bond sectors posting positive returns and gilts well outperforming the falling equity markets.
Balancing a client's portfolio between the different asset classes is one way to ensure that going forward they are exposed to growth but also have the ability to realise gains on some safer vehicles, such as property and cash.
It's not just the trendy that is selling these days but the sensible.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till