Emerging markets, natural resources, gold and mining were the market sectors which outperformed all others during the last decade. A recent analysis of over 4,000 investment funds reveals that out of the top 18 performing funds nine were invested in Emerging Markets, four in Gold and Precious Metals, three in Natural Resources and just two in country specific funds (being Spain and Sweden).
In terms of total returns, one manager stands head and shoulders above the rest. The media-shy philanthropist Peter Pühringer, manager of the ZZ1 fund (an emerging market bond fund), has returned a staggering 631 per cent over the past 10 years, 30 per cent more than the return of the second best-performing manager.
Top manager for the Natural Resources Sector continues to be Ian Henderson at JP Morgan who has been in charge of their Natural Resources Fund since 1992. The fund itself was established in 1965 and has consistently been a top performer in its sector. The Euro equivalent version of the fund is available locally through Middlesea Valletta Life Assurance products.
So what trends might we expect for 2010 and beyond?
Demand from emerging markets suggests the sector will continue to outperform western markets in 2010. While many things in the west are uncertain - the outcome of quantitative easing, for example - the strong competitive advantage China and other emerging markets have over western economies is certain. Those lowly leveraged economies with growing populations are on a growth path that should continue irrespective of whether western economies recover or not.
Commodities represent a compelling long term investment area, boosted by finite supply and the balance of global growth tilting toward nations like China, India and Brazil, and the associated rise in demand for basic resources. Demand for infrastructure development should drive commodity markets higher over the long term.
Gold remains attractive given ongoing high levels of uncertainty in global markets and the US dollar.
In fixed income markets corporate bonds no longer offer the unprecedented opportunity they did in late 2008 however they still present attractive coupons to income seeking investors and opportunities still exist in investment grade bonds. While government bonds are vulnerable to high levels of new issuance, many analysts are now focusing more on high yield corporate bonds, which offer better value.
Emerging market bonds look attractive owing to the stronger economic fundamentals, healthier current account balances and public sector finances of many emerging market countries relative to the western world.
The author is general manager of Growth Investments.