UK - Fund managers are predicting short to medium-term stability for investments in the FTSE100 after several years of high volatility.
Since the technology, media and telecommunications (TMT) bubble - which peaked in 1999 when eight to 10 companies fell in and out of the index each quarter - the last six months have seen few changes to the make-up of the FTSE100.
This period of relative inactivity is expected to continue over the short to medium term.
Legal & General Investment Management managing director of index funds Barry Holman said: “It looks like things are going back to normal with less volatility on the index. The TMT bubble was an exceptional period and there were index changes from mega-mergers across borders.
“All of that has been done now and we expect the index to be more stable like the last six months which have been very quiet.”
At its height companies benefiting from the TMT bubble were dominating the index. At one point Vodafone, just after it had taken over Mannesmann, made up 12% of the index – it has now settled down to around 6%.
But other sectors have taken over as TMT has slipped back to a smaller profile in the index.
State Street Global Advisors deputy head of structured product group Richard Hannam said that at the end of March, the largest individual sector was banks which was 21% of the index.
This, he said, was followed by oil and gas at 16.5%, pharmaceuticals at just over 13% and telecoms services at just below 10%.”
And Royal & SunAlliance Investments' director investment strategist Paul Niven anticipates that TMT will become an even smaller part of the index, with the UK banking sector and pharmaceuticals profiting most from its decline.
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