Expert investors predict growth across many asset classes this year, as the global economy stabilises.
Global investment manager Neuberger Berman has released its third annual outlook across global equities, fixed income and alternative investments, capturing the research of its portfolio managers and analysts.
From an economic perspective, things are improving across a number of major economies, said Neuberger Berman president and chief investment officer Joseph Amato.
“As the Fed and other central banks adjust their approaches, investors should remain alert. Inflation trends remain moderate and we do not expect a significant uptick in rates this year. These shifts in policy merits close attention as investors adjust portfolios to capitalise on the improved growth and somewhat tighter monetary conditions.”
In equities, Amato anticipates continued earnings growth this year, tied to modest operating leverage as developed economies pick up.
Chief investment officer for fixed income Brad Tank said investors can expect slow and steady growth and the potential for rising rates in this sector.
“In my view, we’re probably in the middle innings of this growth phase in the US. Things are getting better, but not rapidly.
"For the coming year, we anticipate a relatively benign growth environment, with continued momentum in the US, a modest acceleration in Europe and an ‘Abenomics’-driven recovery in Japan, offsetting China’s slower growth trajectory.”
An improving economy should lead to more private equity buyout activity, according to Anthony Tutrone, Neuberger Berman’s global head of alternatives.
“At this point, we haven’t gotten to a major acceleration in buyouts, but we believe deals will begin to pick up,” he said.
Alan Dorsey, the firm’s head of investment strategy and risk, said a key issue for 2014 is achieving incremental return—whether through capital appreciation or additional yield—and keeping in mind return outlooks have gradually shifted downward while interest rates remain extremely low.
Alternatives are one key area that has gained traction, but another particularly important one from a portfolio allocation standpoint is emerging markets, he said.
“As investors enter 2014, improving global growth combined with shifting monetary policy are creating a nuanced environment, with obstacles but also opportunities,” said Paul O’Halloran, the company’s Australian managing director.
Neuberger Berman has 30 offices worldwide and manages over US$227 billion in equities, fixed income and alternatives. It was founded in 1939 and established an Australian office in 2011.
The report is available for download