Bonham Carter: Why I’m avoiding property

Jupiter CIO Edward Bonham Carter is avoiding property, saying the asset class’s yield does not make up for its faults.

"I’ve got a bias against property at the moment. It’s a crowded trade which has done well in central London but not elsewhere. Its 4 per cent yields are reasonable, but given what an illiquid investment it is that’s not rewarding enough," he explained.

"Property is a traditional safe haven, but many safe havens are over-owned and expensive. Property funds’ correlation to residential property is worrying, and it is also expensive, relative to income."

He says this negative view, mixed with his macro outlook, is why he’s focusing on equities – a view that echoes that of BlackRock’s CIO Larry Fink.

"Equities are under-owned, unloved, and cheap. There’s intrinsic value in strong cash generation and strong dividend streams, while sentiment is very poor and there has been extreme volatility. Global titans are offering an inflation hedge with a yield and strength," he said.

"Risky assets are still risky, but many are under-owned, offering a good yield, and are relatively cheap."

On the subject of emerging markets, Bonham Carter says the sector will outperform, but with high volatility.

"Emerging markets have traditionally performed as a higher-Beta derivative of developed markets, and a slowdown in the West will impact the developing world. The US consumer is still very important to emerging market exporters, and Europe is also an important export destination, so a slowdown or a recession in the US and Europe will hurt emerging market exports," he said.

"Emerging markets have yet to decouple, but they will."