A professional investor tells MoneyWeek where he'd put his money now. This week, Max King, co-manager of the Investec Managed Growth Fund.
UK smaller companies have had a tremendous three years of performance and many experts are recommending a switch into larger companies. Given that small-cap managers have a more consistent record of beating their indices than large-cap managers, I expect the long-term outperformance of smaller firms to continue.
As far as emerging markets are concerned, they have come a long way in a short time. Nevertheless, they remain good value and there is no likelihood of the emerging economies sinking back into stagnation. In the case of split trusts, many private investors still regard these as toxic waste, but if they are well managed and in a rising market, they're prolific money-making machines.
It is hard to remember a time when so many diverse themes have been making money simultaneously. It is always tempting to take profits and to worry about the next down-cycle. The lessons of the TMT boom and bust were too painfully learnt to have been forgotten in a hurry, but as long as investors spend half their time looking over their shoulders, the market trend should remain upwards even if it is peppered with corrections.
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It is getting increasingly hard to find contrarian investment opportunities, but there are still a few left. Investors are united in their bearishness on both the dollar and the US stockmarket, but currency weakness is usually a precursor to market outperformance. The US has been left behind other markets in the last three years, its valuation premium has disappeared and there is no sign of its pre-eminence in key growth sectors diminishing. If you're looking to invest, JP Morgan American Investment Trust offers an attractive way in. It's on a discount of more than 5% and has some gearing to help it outperform a rising market.
My favourite pick, however, is our own Investec Pan-African Fund. At last, the economies of Africa are prospering and the continent is producing an increasing number of well-managed companies worth investing in. The South African market still dominates; only 12 years ago few would have dared hope that the end of apartheid would bring such prosperity. I particularly like challenging the assumption that Africa is either a hopeless case for investment, is dependent on Western charity, or is terminally crippled by corrupt tyrants. The tide of globalisation bringing prosperity to emerging and developed economies is thought to pass Africa by. Yet investors have made money in many unlikely places in the last ten years; Africa is no exception.
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