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Valentine's Day: 10 readers in love & an ode to RDR

We asked a handful of our readers to name the asset class they really love this Valentine's Day, while one romantic chose to pen a poem for RDR.  

John Dance, branch principal, Vertem Asset Management

For years to me, it was just dull and boring
With low correlation and just trundling along
Going nowhere special, the returns had me snoring
But the credit boom came and I realised I was wrong

First we had a bubble and tightening spreads
The returns were good but it was all just too easy
As interest rates rose we were scratching our heads
Because bond yields stayed low and it made us feel queasy

Along came the crunch and bonds started to slide
Correlation had proved to be a fair-weather friend
There was total carnage and nowhere to hide
All assets fell too, it felt like the end

But it wasn’t the end, just a new beginning
With QE and stimulus the dynamics had changed
Where should I be on the curve to make sure I’m winning?
What assets to buy, what’s my duration range?

As tapering bites we must get it right
It’s a fascinating challenge to get a portfolio on song
Technical tasks keep buzzing all night
It’s a brilliant asset class, I was wrong all along!

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James Horniman, partner James Hambro & Partners

Assurance: Companies such as Aviva and Prudential are offering excellent long term opportunities as the interest rate cycle starts to turn.

Mining: The valuations of majors BHP Billiton and Rio Tinto are starting to look cheap as the world comes out of recession.

Other financials: This sector (together with the Banks) offer interest as the market starts to discount the prospect of rate rises.

Real estate: Economic recovery will tighten the supply/demand dynamic in this sector.

Eastern promise: The fall in eastern markets has brought down high quality names like Diageo, Unilever and Reckitt Benckiser – some valuations are starting to look attractive.

Lovers of acronyms will notice my current thoughts reflect a true Valentine’s Day theme. With apologies to Dean Martin – that’s Amore.

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Charles Aram, chief executive Henderson Rowe

I am very happily married to equities; owning shares of growing strong businesses is a joy. With bonds looking fully priced and the global economy gradually healing, my wife (equity ownership) looks even more glamorous and lovely than ever.

The mistress is smart beta; it's different, slightly exotic, low cost and stylish. Very similar to my wife but a little bit leaner and a lot younger. She (smart beta) has me skipping to work.

Romance with finance!

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Kevin Corrigan, head of credit, Lombard Odier Investment Managers

We love corporate bonds in the crossover zone between investment grade and high-yield. These bonds rated BBB and BB enjoy similar returns (annual returns of +9.24% 2005-2013) to high yield (+9.32%) but with half the maximum drawdown risk (-16.02%) compared to high yield (-35.16%).

The artificial distinction between investment grade and high yield means managers, who either focus on investment grade or high yield, are reluctant to hold bonds heading out of their area of expertise, even if the investment case remains intact.

By avoiding bonds moving across the divide, they leave value on the table.

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Ian Williams, chief executive officer, Charteris Treasury Portfolio Managers

Valentine's Day statistically brings the highest number of marriage proposals of any day in the year - along with gifts of gold, silver & diamonds to the recipient of the marriage proposal.

That being so why not make every day Valentine's Day and buy gold & silver anyway. 2014 looks set to be a very good year for these metals (and the gold and silver mining companies) having already started this year on top of the performance tables.

Romance is alive and well in the Way Charteris Gold & Precious Metals Fund which is up over 20% in 6 weeks since 1st January. At this rate of return the romantically inclined can afford to buy the object of their desire an even more expensive present.

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Tom Stokes, wealth management consultant, Walker Crips

Size isn't everything and that's why I love UK Small Cap.

It covers smaller UK companies that make up the back bone of the UK economy; they are often overlooked and under researched by the wider market presenting much opportunity, exemplified by strong performance figures.

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Simon Brett, chief investment officer, Parmenion

With an expanding economy, more healthy banks, falling unemployment and a can do spirit, it is America the Beautiful!

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Richard Champion, chief investment officer, Sanlam

I love companies where managements love their shareholders, and where they adore their business; where they build a franchise with high returns on invested capital, strong competitive position, a strong balance sheet and where they grow their earnings and dividends consistently over time.

They tend to make me and my clients loads of money.

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Peter Lowman, chief investment officer, Investment Quorum

Whilst equity markets were kind to investors in 2013, particularly those of the developed world, we still see equities out-performing other asset classes in 2014. Clearly, many of the equity markets are unlikely to deliver similar returns to those of last year but with the leading central banks around the world continuing to be accommodative further opportunities should present themselves over the coming months.

It is likely that the developed markets of Europe, Japan, UK and the US will be the global investors preference of choice over the first half of the year as the US tapering programme continues. However, we might see some momentum building for emerging markets over the second half of the year, particularly those of the frontier markets where perhaps growth expectations look rather more appealing.

Obviously, the present-day caveat for selecting regional equity exposure is rather like picking your gift for this year’s Valentine’s day; you cannot afford to make too many mistakes otherwise the outcome could turn out to be rather painful.

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John Greenwood, chief exectuive, Creechurch Capital

An ode to property

Investors love to put money in bricks and mortar,

A long-term investment for your son or daughter,

Inflation-protected income from a strong asset class,

A secure home for your hard-earned brass.

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Michael Lally, director, Thesis Asset Management

Oh RDR where do I start?
In one short year you broke my heart,
A million words cannot begin,
To compensate for my chagrin.

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