Investors are beginning to notice that the under-researched mid cap asset class – especially around the $1bn–5bn mark – can offer a winning combination of upside potential and limited downside risk.

Imagine a racehorse which, for 10 years, wins more races than any of its rivals, but is hardly ever bet on by the public – seldom even by professionals – and gets only minimal coverage in the racing pages.
Implausible certainly, but this is exactly what has happened in the investment world. Mid cap value beat all other US equity asset classes over the 10 years to 2002, according to Lipper statistics, and yet it accounts for only 2.9 per cent of invested equity assets. (See Charts 1 and 2.)

Demand has been high for indices that reflect recent currency changes in the trading marketplace and the broader European landscape.

Today’s market conditions and Europe’s expanding horizons require new index products. The main European index, for example, is now over five years old – predating both the euro and the end of the 1990s bull market.

Japan’s stock market has been on the threshold of recovery numerous times, but has always failed to deliver. Simon Hildrey assesses reports that this time, it’s for real:

Andy Whelan explains why all that glitters is most certainly not the US economy nor its currency. Gold has a proven inverse correlation to both capital markets and more importantly to the dollar. This relationship has been very profitable for those investors who had the foresight and courage to invest in gold in March 2001, when the metal was trading at $258 (e221) an ounce. While the MSCI World Index has fallen by 12 per cent, gold bullion has gained 47 per cent – an out performance of over 60 per cent.

Chris Turner assesses the risks of investing in Europe’s vacant office building stock.

Wander around the business districts of any major city of Europe and you cannot help but notice that the number of “To Let” boards attached to office buildings is a lot higher than it was two years ago. If you take a drive round any city’s outer ring road the boards will be even more numerous.

James Jacklin explains why finding the right fund of hedge funds manager is so important. In recent years, the number of hedge fund providers as well as the variety of hedge fund investment styles available has increased significantly. While choice has expanded, the task of choosing a hedge fund product has not got any easier. In an effort to attain the attributes that hedge funds add to a portfolio many investors, both private and institutional, have chosen to minimise their exposure to any single manager or product and have opted for funds of hedge funds.

In this section of PWM we test the performance and volatility of two investment strategies using model portfolios. Each month we look at two baskets of shares – one global and one European.