Investors should take on more risk

INVESTORS should take on more risk in their portfolios, says JP Morgan Asset Management (JPAM) portfolio manager Talib Sheikh, even as expectations of returns from global equities are muted compared to the past few years. Mr Sheikh says that investors have hardly participated in the rally in global equities since crisis lows, and are still holding too much cash. He is the firm's managing director (investment management solutions) within the multi-asset group.

"This is a rally in equity markets that very few people are invested in, and few people have made huge returns. I think they are waiting for dips to buy . . . Equities are a decent place to be in, even though in some cases they are at all-time highs."

He says that investors should, however, rein in their return expectations. "On a one to two-year basis, we are talking about high single-digit returns in developed market equities, not the 20 to 30 per cent that we've seen over the last few years." Going forward, equity returns are likely to be driven by earnings growth rather than a multiples expansion.