After one of the toughest market environments in recent memory, ETF Stream asked five fund buyers to reveal the ETF they believe will deliver strong performance over the next 12 months.
Jordan Sriharan, fund manager, Canada Life Asset Management
ETF: SPDR Morningstar Multi-Asset Global Infrastructure UCITS ETF (MAGI)
My top ETF pick for 2023 is MAGI. The objective is to track the global infrastructure market of publicly traded equities and bonds, equally-weighted and rebalanced quarterly, across 18 infrastructure-related industries. We are looking to hold the fund in our volatility-managed multi-asset portfolios.
The fund outperformed the global equity market last year but naturally still generated negative returns. It has a 47% weighting to utilities and a 35% weighting to transport and infrastructure while energy is only 4%. Given the higher-inflation environment, infrastructure is an important allocation in portfolios in 2023, and one which we would expect to continue to outperform the general global equity market.
Lynn Hutchinson, senior analyst, Charles Stanley
ETF: L&G ROBO Global Robotics and Automation UCITS ETF (ROBO)
Just as the internet transformed how we work and communicate, robotics and automation is changing the fundamental structure of sectors across the economy. Robotics and automation were one of the themes accelerated by the COVID-19 pandemic that has increased the use of technology with automation – carrying out processes with machines that cannot get sick. Reshoring, labour constraints and inflation are to some degree driving up spending in automation of every kind.
Technology spending is cyclical but the push for automation spending, especially enabled by robotics, is different in that the need is not cyclical, but consistent. Leaders in nearly every industry are scrambling to automate whatever processes they can and companies that have a consistent need to lower costs and to improve margins may address both with automation. Al most three years after COVID-19 hit, companies around the world still complain that they cannot get the work talent they need, and robotics is one way of alleviating this workforce problem.
Demand for industrial automation today is at record highs and there is more demand for robots and automation than providers can supply.
The index equal-weights around 80 individual companies based on revenue purity from the theme and market/technology leadership of the underlying companies included in the ETF
James McManus, CIO, Nutmeg
ETF: iShares Core MSCI EM IMI UCITS ETF (EIMI)
An overweight to emerging markets is one of our key calls going into 2023. Emerging markets have disappointed in recent years but there is significant catch-up potential from China re-emergence from nearly three years of COVID-19 restrictions. The path will certainly not be smooth but the re-engagement of China’s economy with the global system and the resumption of domestic consumption in China offers reasons for optimism on growth amid reasonable valuations.
Given the political risk emerging market investing entails, we stay diversified and EMIM offers access to over 3000 large, mid and small cap emerging market stock markets across 24 countries. It is highly liquid and cost-competitive with fees of 0.18%.
Wayne Nutland, fund manager, Premier Miton Investors
ETF: Tabula Haitong Asia ex-Japan High Yield Corp USD Bond ESG UCITS ETF (TAHY)
The Asia ex-Japan high yield bond sector has been hit hard over the last 18 months or so, most notably in Chinese real estate bonds, a sector which tends to have relatively high weightings in Asian high yield indices. The sector was hit initially by moves by the Chinese authorities to curb speculation and leverage in the property sector, leading to distress and defaults among some developers, and more recently by the country’s zero-COVID policy.
Recent weeks have seen a significant change in the approach of the Chinese authorities towards the property sector and COVID-19.
While the ETF has performed strongly since the early November lows, valuations are such that there remains potential for further upside should events continue to develop in a positive manner, although this remains a risky allocation and should be sized accordingly.
Peter Sleep, senior investment manager, 7IM
ETF: iShares Core MSCI World UCITS ETF (SWDA)
I am the worst ETF picker I know so I am not going to recommend a meme-y thematic ETF that will probably drop by 80%.
My ETF of 2023 is SWDA which I think will have the biggest inflows in 2023. This is a proper ETF for serious investors and it should be a core holding in all our portfolios. It is also enormously successful with $45bn assets under management, internationally diversified, highly liquid and cost-effective.
As markets recover, I am confident this will be a winner for the investor and the issuer.
This article first appeared in ETF Insider, ETF Stream's monthly ETF magazine for professional investors in Europe. To access the full issue, click here.
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