Losers poised for rebound

Analysts agree that asset-class cycles played a major part in determining the best and worst fund sectors of the decade.

North America and tech funds were doing very well at the end of the previous decade, while commodities and emerging markets were out of favour. Their reversion to mean valuations reversed this trend over the next 10 years.

Many analysts have, therefore, picked the worst performers of the noughties as some of the most likely winners over the next 10 years. Mick Gilligan at Killik & Co and Ben Yearsley at Hargreaves Lansdown both recommend tech companies, which have generally positive cash flows and little debt.

The exception to this “buy low” theory is emerging markets, which some believe are now valued correctly. Analysts still cite China, with its growing middle class, as a key buy for the next decade. However, they suggest buying emerging markets through a more indirect route.

Gilligan says: “One area I think isn’t particularly appreciated in valuations is western companies selling into emerging markets – that will be a key theme over the next decade.” He also favours tech and biotech sectors as likely to outperform.

Adrian Lowcock at Bestinvest says Japan could be a good area to get exposure as the country exports a lot to other Asian countries.

“I think there’ll be a grind for a couple of years so you want managers who’ve been round the block a few times,” says Yearsley at Hargreaves Lansdown.