iFast conducts an annual poll of the different fund houses to get opinions of their most and least favored investment sectors for 2011.
A quick snapshot of this year’s poll results are as follows:
- Most favoured region: Asia 70%, Global Emerging Markets 15%
- Least favoured region: Europe 42%, Japan 27%, US 26%
- Most favoured Asian country: China 57%, India 15%, South Korea 9%, Singapore 8%
- Least favoured Asian country: India 27%, Singapore 13%, South Korea 13%
- Most favoured bond sector: Emerging markets 53%, Investment grade 30%
- Least favoured bond sector: Developed markets 93%
- Most favoured sector: Consumer discretionary 26%, Industrials 22%, Financials 14%
- Least favoured sector: Consumer staples 33%, Telecommunications 25%, Utilities 17%
It appears that the areas with the greatest consensus would be the most favoured region (Asia), least favoured region (Europe), most favoured Asian country (China), most favoured bond sector (Emerging markets) and least favoured bond sector (developed markets).
iFast further did a research to compare the poll results over the same few years with the actual performance.
They found out that the consensus was generally good at picking regional markets, but poor with their Asian single-country selections.
Often, the top country picked was just the top performer for the previous year and tended to perform poorly. The top picks for the various years and their actual rank (out of 10) for that year are as follows:
- 2002 – Taiwan 10th
- 2003 – Thailand 1st
- 2004 – Thailand 10th
- 2005 – Indonesia 5th
- 2006 – South Korea 9th
- 2007 – China 2nd
- 2008 – Singapore 5th
- 2009 – China 8th
- 2010 – China 10th
To add further insult to injury, the least preferred country actually performed better than the most preferred country in 2004, 2005, 2006, 2007, 2009 and 2010.
- 2004 Philippines 3rd
- 2005 South Korea 1st
- 2006 Indonesia 2nd
- 2007 India 1st
- 2008 India 10th
- 2009 South Korea 7th
- 2010 Malaysia 4th
If you look at the performance from 2004-2007, you might even think that these were the most preferred countries. Now you know that even experts have difficulty getting the country selection right.
Which is why most of the time, I prefer to select regional funds for my clients and let the fund managers do a bottom up stock selection process rather than try to overweight particular countries. If anything, I’m more likely to avoid top performing countries than anything else.