Investors will need to get used to single-digit returns as value becomes increasingly difficult to capture in global markets, says Wingate Asset Management.
Speaking to InvestorDaily, AUI fund manager Wingate Asset Management chief investment officer Chad Padowitz said investors need to become accustomed to returns of around five per cent – while exposed to significantly more volatility.
“It’s going to be a tough couple of years from an investment point of view because there’s no asset class that has an expected investment return of over five per cent,” Mr Padowitz said.
Mr Padowitz argued that a five per cent return rate is also ambitious, particularly when employing a balanced investment strategy.
“Five is a big number; the Aussie market is not doing five at the moment, the cash and fixed interest is not doing anywhere near five. So to get five if you’re diversified is an exceptionally ambitious target.”
As a result, Mr Padowitz said investors need to stop looking for growth and start seeking value instead.
“When you’re buying growth you’re going to be disappointed because when you buy growth and growth isn’t delivered, you’re going to be hit very hard.
“It’s very hard to find growth opportunities because the areas that are growing are few and far between.
"It doesn’t mean they’re not there, but if they are, they’re valued accordingly,” he said.
Mr Padowitz sees value in sectors that are currently out of favour such as industrials and financials.
“Where we think the opportunity is, is where there is an unsustainable level of demand currently that has to come back up at some point.
“You have companies that will use this downturn to become more efficient, to take out their competitors, to invest in the downturn, so when things recover they’re stronger,” he said.