However, Mark Holden (pictured right), manager of the Ignis UK Focus fund, believes there are still plenty of stocks that can deliver competitive returns, even in a worst-case scenario.
Here is a selection of his high-conviction plays:
Royal Dutch Shell
"After nearly a decade of heavy capital investment in new projects that produce cleaner fuels such as LNG and US shale gas, the company is now poised to begin reaping the rewards."
"Once these new products are ramped up to full production – which is now happening – they require very little ongoing maintenance cap-ex. However, they are then capable of generating very long-term highly profitable stable cash flows."
"The current share price does not reflect this accelerating growth or the improved total return prospects that the additional cash generation is capable of producing. The company looks a very attractive investment for what might prove a very difficult 2012."
Shell is Holden’s largest holding, accounting for 8.2 per cent of assets under management (AUM). It is one of the most popular stocks with UK fund managers, appearing in the top-10 holdings of 514 vehicles in the unit trust and OEIC universe.
Kirkland Lake Gold
"Until governments stop printing money and short-term interest rates rise, gold should be an attractive investment relative to many other assets."
"Kirkland is a mid-sized gold producer and exploration company, whose asset is situated in Canada. In recent years production problems have dogged the company, but a newly appointed mine manager has made a very positive impact and the worst now seems to be behind it."
"Production is now forecast to treble over the medium-term, which will also have a positive impact on operating costs as it reaps economies of scale, thereby materially improving company profitability."
The firm has a 4 per cent weighting in Holden’s portfolio. Only one fund – Way Charteris Gold Portfolio – has a bigger stake.
Rockhopper Exploration
"This is an oil-exploration play, but it is also a non-economically sensitive investment with potentially unprecedented upside."
"Rockhopper has already made a large oil discovery to the north of the Falkland Islands called Sea Lion. Management is actively evaluating potential partners to fund and help develop the find, and has suggested this process could be completed in the first half of 2012."
"If successful, the company’s risk profile will drop materially and the share price should be able to begin closing the gap between the theoretical and the current subdued price. This will allow it to strongly outperform a stock market potentially in the grip of recession."
With a weighting of 4.4 per cent, Rockhopper is one of Holden’s biggest holdings. Fidelity UK Growth and Royal London UK Growth also include the company in their top-10.
Tate & Lyle
"The company is best remembered by consumers for its sugar business, but sadly by investors for its extremely chequered track record and volatile historic share price performance."
"However, a new chief executive has rapidly restructured the group, effectively minimising exposure to volatile commodity price swings and unpredictable earnings streams."
"At the same time he has reinvigorated the growth parts of the company, particularly those in its high margin speciality food ingredients division, and focused attention on expanding in developing markets."
"These changes are providing shareholders with less volatile, yet materially more predictable growing earnings. These should be rated more highly by investors as time goes on, particularly with significantly increasing earnings volatility elsewhere in the market."
FE Alpha Manager Ben Whitmore’s Jupiter UK Special Situations fund is one of 15 that hold Tate & Lyle in their top-10. Ignis UK Focus has a 3.6 per cent weighting to the company.
Babcock
"With governments and companies struggling to contain costs and minimise non-essential expenditures, the potential opportunities for outsourcing companies are expanding rapidly."
"Babcock is well placed to benefit from this trend and thereby supplement its already extremely strong and highly visible order book."
"Since the UK’s coalition government came to power, contract awards have all but ground to a halt; however, the past few weeks have been very encouraging and seen the award of several large, long-awaited contracts from public sector departments."
Babcock, the UK's leading engineering support services business, was reported to have won a contract with the BBC World Service last week. The company has a 2.9 per cent weighting in Holden’s portfolio.
Holden has headed up the £97m Ignis UK Growth portfolio since October 2011, taking over from Ralph Brook-Fox. He has returned 13.89 per cent since his appointment, outperforming its FTSE All Share benchmark by 3.89 per cent.