Dubai: Although the world's millionaires still desire tangible investments, they think that this year's best performing asset will most likely be equities, not property. Financial experts, however, reiterate that diversification is the key.
According to the Wealth Report 2010, 31 per cent of high-net-worth individuals (HNWIs) around the world expect equities to outperform other asset classes this year.
Hedge funds are expected to do well also, with 25 per cent of the rich investors putting them at the top of their performance list. A smaller portion of HNWIs (21 per cent) chose property as the top performer.
Losses
However, for Steve Gregory of Holborn Assets, property will not do well this year due to lack of liquidity.
"In my view, property will continue to take losses across the world this year. Without funding, there is no market for properties because buyers cannot find mortgages. Hence, prices will fall further," he tells Gulf News.
It may not be wise also to bet on bonds, hedge funds, gold and other commodities.
"Bonds are an unsafe bet this year, too. Interest rates can only go up from here. Inflation, especially food and staples price inflation, will cause governments to increase interest rates. When interest rates go up, bond values fall, because nobody wants to buy low-yield bonds."
"Hedge funds tend to make profits from volatility and are not stock market-correlated. If stock markets continue their upward movements, then hedge funds are not likely to perform. Gold and other commodities are difficult to see as profit-making because they never pay income, unlike property and stocks," Gregory adds.
Overheated
Ishrat Kiyani, UAE head of premier banking and wealth management at HSBC, says an asset class with low correlation to "long only" assets, or maybe some sector-specific investment in agriculture and health care will prove a good bet this year. He, however, advises against betting on a single asset class or sector.
"In my opinion, markets seem a little overheated at present and may have moved ahead of their fundamentals. Therefore, I would not be surprised if we were to see a double-dip recovery, with the second dip coming in 2010."
"However, it is essential that investors do not go chasing a particular asset class or sector. Stay diversified and actively manage the portfolio within your preferences and tolerances for best long-term results," Kiyani tells Gulf News.
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