Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Mike Turner, head of multi-asset at Aberdeen Asset Management.
Despite talk of the Bank of England looking to start raising UK interest rates within the next six to 12 months, this is likely to be a gradual process. Although the UK has reported good growth figures in recent weeks, the recovery is still fragile.
For example, as the Bank of England itself has noted, the level of personal debt outstanding remains high. As a result, the low-yield environment which we've been familiar with for the past few years may not disappear anytime soon.
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That means savers and investors will need to continue to find innovative ways to offset the impact of low interest rates on their income.
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It is also important to find a range of diverse sources of income that can protect your capital against adverse market conditions, as well as from the corrosive effects of inflation.
Prudential (LSE: PRU) remains one of our favourite financial investments. The company has a tremendous market position in Asia's rapidly expanding life and health insurance sector, which is benefiting from demographic trends (lots of young people) and low rates of product penetration (far fewer people as yet have insurance than in more developed markets).
In the US, meanwhile, Prudential has a leading proposition in the variable annuities market, which is doing well as members of the baby-boomer generation seek to provide for their retirement.
Prudential's more traditional UK business generates lots of cash flow and it also has a top asset management franchise in M&G, whose products have seen strong demand.
These excellent long-term growth opportunities, combined with its very solid capital base and well-regarded management team, leaves Prudential with the potential to deliver significantly enhanced returns to shareholders over many years to come.
Compass (LSE: CPG) sits at the opposite end of the spectrum, revelling in the glorious dullness of being the world's leading contract catering and facilities management business. This is an extremely well-run company with an excellent management team and a leading position in its market.
It stands to benefit from a number of factors: increased levels of outsourcing in developed markets; an expansion into the facilities management business; growth in the emerging world; and overall growth in employment levels. Compass generates prodigious cash flow.
Given its strong balance sheet and relatively acyclical earnings (it's not overly dependent on a healthy global economy), it looks well placed to keep paying and growing cash payouts to shareholders. It has already delivered three substantial buybacks and a large special dividend in recent years, on top of healthy growth in the underlying dividend.
3i Infrastructure (LSE: 3IN) is another company we like. It is slightly different to other infrastructure funds in the market, as it part-owns its underlying investments rather than having a 20 to 25-year concession to run the assets as is the case with some of its sector peers. It's also far more concentrated, with significant investments in the transport, energy and water sectors.
Like the rest of the infrastructure sector, the company benefits from visibility of long-term cash flows (many of them index-linked), and it currently provides a secure level of income, as many of these are backed by governments or quasi-government agencies.
The sector has continued to attract new capital as the asset class has become more widely held, and if bond yields remain low, this should continue to prove the case.
