Commodities, especially gold and oil, is the mainstream asset class most likely to deliver positive returns in 2019, while equities on both sides of the Atlantic will end the year lower ahead of a recession increasingly expected in 2020, according to Managing Partners Group (MPG), the international asset management group.
MPG believes the inflation-proofing qualities of commodities means the asset class will appeal to investors generally as the US economy continues to show signs of overheating. In particular, gold is set to see a significant increase in value, possibly as high as 20%, as investors seek safety in the face of continued uncertainly around equities and more interest rate rises putting pressure on bonds.
Oil prices will be boosted as a result of diminishing spare global capacity, sanctions on Iranian exports and political uncertainty in Saudi Arabia creating additional inflationary pressures globally, the company says.
Jeremy Leach, Chief Executive Officer, MPG, commented: “Key drivers of an equities bear market will be Brexit uncertainty, further tightening of monetary policy on both sides of the Atlantic, political gridlock and trade tensions – all forcing equity values lower in the UK, Europe and the USA.
“While many analysts think the S&P 500 will end 2019 higher than its current level, this is optimistic given that recession is widely predicted for 2020 and a bear market for US equities is more likely in 2019.
“European equities remain overpriced and the eurozone will experience slower growth in 2019, owing to monetary-policy tightening, cessation of QE, trade frictions and the unsustainable debt dynamic in Italy and Greece.”
As investors seek alternative investments in 2019, one asset class they will find increasing attractive is life settlements, which are US-issued life insurance policies that have been sold by the original owners at a deep discount to their maturity values and are institutionally traded through a highly-regulated market. The asset class is currently offering internal rates of return of around 14.7%.1
Jeremy Leach commented: “2019 will be the year of value and investors will find it difficult to find assets offering returns as favourable as life settlements. At 14.7% the IRR on life settlements is still significantly higher than the risk-free rate, so now is still a good time to invest in the asset class, especially now when the consensus is that under-supply will push up prices.”
On Brexit, MPG believes a better deal than the one currently being mooted is inevitable because, politics aside, no deal is a bad outcome for all concerned, particularly the powerhouses of Europe that are heavily reliant on continued trade with the UK.
Jeremy Leach added: “A workable deal will therefore be concluded, which may well include a larger monetary settlement that will be more fortuitous for the EU and will represent a better outcome for the UK, boosting the UK economy and sterling.
“A reasonably successful exit in Q2 will not lead to long lasting euphoria in Europe, however, and will be one of a number of factors stimulating continued political unrest in the bloc. With a successful Brexit conclusions there is a real risk of another potential departure from the EU that may even threaten the future of the currency Union.”
High protection Fund
HPF is a regulated mutual fund that was launched in 2009 that aims to deliver absolute returns by investing in a portfolio of life settlements.
HPF aims to achieve smooth, predictable investment returns of circa 8% per annum for institutional and sophisticated investors by acquiring TLPs at a deep discount and holding them to maturity. The TLPs are valued in accordance with fair value methodology until the fixed pay-outs are received by the fund.
HPF is a Cayman Islands-regulated mutual fund and has seven asset classes denominated in US dollars, euros, sterling and Swiss francs. The minimum direct investment is USD 100,000 or currency equivalent. The minimum investment via platforms and wraps is USD 5,000 or currency equivalent.
MPG is a multi-disciplined investment house that specialises in the creation, management and administration of Cayman Islands regulated mutual funds and issuers of asset-backed securities for SMEs, financial institutions and professional investors. The wider Group currently has over $500m assets under management.
MPG is an award-winning business, having been named the 2018 Alternative Investment Firm of the Year – Europe by The European business publication, while its High Protection Fund won the Best Diversified Fund (Five Years) and Best in Insurance-Linked Investments categories in the 2018 Corporate USA Today Awards.