Swedish fund professionals forecast stronger stock market , says SPP research

Research commissioned by Storebrand/SPP Fonder has found that fund industry professionals in Sweden expect positive developments on the stock market next year, with Europe seen as the most interesting region in which to invest.

The views are contained in the latest Svenskt Fondexpertindex (SFEI) – roughly translatable as the Swedish fund professional index -s compiled by Laika Consulting on behalf of Storebrand/SPP Fonder – which indexes viewpoints from industry professionals and is updated on a running basis.

The latest index suggests that those in the industry have not been as positive towards the stock market since 2009, despite ongoing challenges such as the eurozone sovereign debt crisis.

Also of interest for those in the industry is the consensus view emerging in the latest index that the weight of additional administration in the wake of increasing regulation means that the point is well past in which there would be any benefit to investors.

A number of those canvassed for the index results were sharply critical of what they saw as regulation for regulation’s sake, and that the culling of smaller funds and managers that cannot carry the additional costs has resulted in reduced choice in the market.

Peter Beckman, vice CEO for SPP Fonder said: “When administration becomes so all encompassing that it takes resources away from management and even knocks out fund managers, then it is time to take a step back and reflect. SPP is in favour of choice and a market that has room for both bigger and smaller players in the fund market.”

In terms of themes considered in the latest index update, there is a warning about the popularity of bond funds.

A number of fund professionals warned of the consequences of negative returns when interest rates are raised from their current low levels. At the same time, there are big differences in the types of corporate bonds on offer, and the experts are generally positive to this type of investment over time.

“The fund professionals point out that it is important for ordinary investors not to invest blindly in corporate bonds, but take the time to look at the different managers and the products on offer. Just as for any investment there is a risk of future downturns, and this is something that is important to consider,” Beckman said.

Summary

The index consensus is for equities to return 8.2% over the next 12 months.
Europe is seen as the most exciting region for equities, despite the uncertain economic climate and ongoing sovereign debt crisis.

The US is seen as the most interesting region in the very short term, despite the fact the country needs to agree on fiscal savings.

The sector seen as most interesting is financials/banks, because of the expectations that the ECB’s support actions will benefit this sector above all.

The trend towards passive funds is expected to increase further, particularly the use of ETFs for markets that are heavily covered by analysts, and where active funds are not seen as being a good way to generate any additional return.

In the area of active funds, the expectation is for corporate bonds and high yielding equities to remain in demand over the coming year.

There are expectations for a continued, slowly increasing interest in responsible investments, particularly in the institutional market. Increasing levels of knowledge about responsible investments mean that demands are developing for more individual solutions or more advanced solutions. This may lead to greater use of positive screening or that the jargon and methods uses are broadened to include sustainability criteria.

Some 80% of the fund professionals polled for the results have used corporate bonds in the past year, and about 90% have increased their fund analysis in the area. Corporate bonds are seen as a good asset for increasing diversification in a portfolio.

 

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