Look beyond recent winners for return opportunities

Investors may need to look beyond recent equity market winners to achieve their 2025 return objectives, the media were told at Schroders Crystal Ball 2025 Investment Outlook event.

Schroders Group Chief Investment Officer (CIO), Johanna Kyrklund, and Nils Rode, CIO for Private Markets at Schroders Capital, identified the encouraging investment opportunities on offer with 2025 fast approaching.

Johanna Kyrklund said:‍

“We think there are return opportunities to be had, even after the gains of 2024. But investors may need to look beyond recent winners. Equity investors have grown used to a small number of large companies powering the stock market’s gains. But that pattern was already changing during 2024 and we think there is potential for markets to broaden out further.

“Different sectors and different regions may start to appear more attractive. An active approach will be needed to avoid overexposure to previous top performers, and to capture new return opportunities as they emerge.

“Equity market valuations do not look expensive outside the US. And an environment of positive growth and lower interest rates should benefit corporate earnings, which is what drives shares over the long term.”

Johanna also discussed how we continue to view bonds favourably for the old-fashioned reason of income generation, the importance of portfolio diversification in terms of ensuring resilience amid ongoing geopolitical uncertainties and the significance of decarbonisation as a key investment theme.

Nils Rode said:‍

“We anticipate 2025 to be an attractive environment for new private market investments, offering potential for both return and income generation as several cycles align favourably. These include the private market fundraising,
technological disruption and economic cycles.

“Simultaneously, considering ongoing geopolitical tensions and the elevated risks of escalating conflicts, the role of private markets in providing portfolio resilience remains crucial. Meanwhile, and despite political changes in the US, we expect the trend towards decarbonisation to persist, with private market investments playing a significant role in driving the global energy transition.”

Nils pointed to the small/mid-buyout and venture capital space as being the most attractive in private equity, with real estate also expected to enjoy a good vintage year, while the private debt premium remains attractive across several strategies.