Brookes says the liquidity driven rally of the past year, which came off the back of record amounts of government stimulus – particularly in the UK, the US, China and Europe – will tail off as spending is reduced. He says that, while the intervention prevented a 1930s-style deflation and unemployment, in the UK at least it did not pull the country out of recession to the degree expected.
"QE is now finishing, and the cash-for-clunkers type schemes are coming to an end. Taxes are rising and everyone is talking about cost cuts around the world and in the UK," Brookes says.
"It doesn't look like there will be a big demand backdrop, but there is still heavy supply from 2006-2007. This is a year when we won't see disaster, but there will be some fairly challenging markets. You may see 10 or 20 per cent drawdowns. There will be some bounce backs as well, but investors need a diversified portfolio," he adds.
Brookes, who manages Cazenove's Multi Manager Global ex UK, Multi Manager UK Growth, Multi Manager Diversity, Multi Manager Diversity Tactical and Multi Manager Diversity Balanced funds, says he has seen strong demand for these types of multi-asset portfolios.
"The proper way to get a diversified portfolio is the multi-asset approach," the manager says.
He adds: "All the way through an economic cycle you are going to have some bonds, some equities, and some cash. And we can be very tactical about what we give our clients."
Brookes says multi-managers are essentially aiming for the same goal as IFAs and individual investors; getting the best risk return profile for their assets given their attitude towards risk. He says investors like multi-mangers because they offer fund selection as well as asset allocation.
Performance of 5-yrs
Source: Financial Express Analytics
"Some advisers and individual investors are uncomfortable in trying to work out whether they should be overweight UK, or overweight US, or whether to have lots of fixed income, for example. Multi-manager has proven itself to be good at asset allocation," he says.
Speaking on the recent changes brought about by the RDR, the manager says the strategy stands to benefit, as IFAs' responsibilities towards their clients will change.
Historically, IFAs have been comfortable in advising across a full range of issues, such as tax, suitable levels of portfolio risk as well as portfolio construction, Brookes notes. But, RDR is trying to separate those responsibilities, and investment professionals are therefore engaging with IFAs to create bespoke portfolios.
"In that sense, we are getting much better professional linkage between those who are good at giving financial advice, and those who are good at managing money. That's why the RDR is good," he states.