AMP Henderson's picks for 2003

While global equity markets are expected to improve in 2003, AMP Henderson reckons it’s a good time to consider asset classes such as private capital and property.

"The similarities in returns from major equity markets are the highest they have been in 40 years suggesting that 2003 equity returns will be fairly similar to each other, whichever market you invest in," AMP Henderson managing director Catherine Savage says.

"This means that to manage risk investors should now look to diversify their portfolios across asset classes, rather than across markets within asset classes. And we believe that two of the most attractive asset classes for 2003 are private capital and property."

Savage says AMPH are not advocating investors cash up their shares because you’ve had a bad run.

"The key to good investment strategy is acquiring a well-balanced portfolio of reasonably priced assets," Savage says.

"Currently we believe private capital and property are reasonably priced and give good diversification."

Savage said that investors had to accept that the consistently strong equity returns of 1982-2000 were unsustainable and that future equity markets would return to "normal" levels of volatility.

"After the expensive markets of the late 1990s, markets are now priced to deliver positive real returns, at something close to long-run levels. That’s about 8% pre-tax for global equities, 10% for NZ equities, and 6% for fixed interest, with currency hedging providing potential for further upside."

"Property and private equity are two asset classes where pricing seems good and diversification benefits tangible. The investment case for property is particularly strong, as property yields have not fallen anywhere near as fast as interest rates, making property increasingly attractive relative to fixed interest."