Good value to be found in international markets: Marriott Asset Management

Right now, most South African fund managers agree that South African equities are at or near fair value, as the average Price Earnings ratio of the Johannesburg Securities Exchange is 20, compared to the long term average of 18. But according to Dr Simon Pearse, CEO of Marriott Asset Management there may be value to be found offshore. In spite of global equity market rebound, there is good value in equity and property markets, he says, but fixed interest assets should be avoided.

International markets saw positive returns during 2009, but on a three-year basis, the performance has been generally negative with only the J.P. Morgan Global Government Bond Index and cash (US dollar) showing positive returns.

In most advanced economies equity and property markets performed well last year, but cash and bond returns lagged considerably. The outlook for the various asset classes is mixed. We favour property and equity investments in the current environment and believe that fixed interest assets are unattractive.

International Real Estate

During 2009 Marriott Asset Management actively promoted quality international real estate as the income streams had become attractive with forward yields exceeding 6%. The GPR250 Real Estate Index returned 34% last year. We are still of the view that this asset class is offering good value with forward dividend yields exceeding 5% and income growth being supported as the developed economies come out of the recession. We remain confident that exposure to the Marriott International Real Estate Fund will benefit investors.

International Bonds

With a general expectation of rising inflation in the global markets, it would be prudent to avoid US treasuries and long bonds in general.

International First World Large Cap Equities

There has been a marked recovery in the first world economies with equity markets having performed well during 2009. There is still real value in selected large capitalisation companies in the US, UK and Europe as the dividend yields remain high at around 4% and are supported by reliable dividend streams.