As global stock markets continue to exhibit volatile tendencies, the diversification benefits of multi-asset funds will attract more investors than any other product, according to the latest IFA poll from financial technology solutions provider, 1st - The Exchange.
The poll of 175 IFAs, which asked what would be the hot financial product of 2010, revealed that 35 per cent of IFAs are putting their money behind multi-asset funds, closely followed by absolute return funds (29 per cent) and passive investment strategies (18 per cent).
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Interestingly, recent news of rising numbers of hedge funds launching 'hedge fund lite' strategies in the retail space using the UCITs III structure has not held sway with IFAs, with only 6 per cent of those polled indicating that these would be the most popular choice. The more conservative investment trust structure was also less popular, with only 12 per cent of IFAs signalling the asset class as the next hot product in 2010.
More than half of the respondents indicated that the focus on diversified investment strategies would be supported by a low interest rate environment. Asked about their interest rate forecasts until the end of 2010, some 47 per cent of IFAs predicted only a very conservative rise of between 0.75 per cent-1.25 per cent until the end of 2010, whilst 18 per cent said they wouldn't rise above 1.75 per cent.
Seventeen per cent believed interest rates would remain at 0.5 per cent until the end of next year. Only 18 per cent predicted a rise above 1.75 per cent and 9 per cent of IFAs thought interest rates could exceed 2.25 per cent in 2010.
Quantitative easing was also highlighted as a key theme in 2010 with 34 per cent of IFAs indicating that the government is likely to extend its programme beyond its most recent commitment of another £25 billion in order to salvage the UK's economy.
"It is interesting to hear the predictions of IFAs given their unique insight into investor demands and future investment trends,” said Paul Yates, propositions and business development director for 1st – The Exchange
“I think 2010 will see a sea change as the financial services industry adopts a more cautious attitude to investment and moves away from riskier assets to a 'back to basics' approach. In addition, with interest rates likely to remain at historically low levels for the foreseeable future, consumers would do well to take advantage of this to pay off debts.
"There is still a glaring need for basic financial education and advice. We are hopeful that if the financial services industry continues to deliver on its promises of greater transparency and simplicity, 2010 will be a more stable year for consumers."
