While many bond funds have complained about the tight spread fixed-income products offer, Mark Dowding, Invesco's head of global bonds, continues to see value in corporate bonds. 'Credit fundamentals of [global] corporations are very supportive for the asset class,' Mr Dowding said, noting that the private sector has been reducing balance-sheet leverage, cutting corporate spending and generating higher cash flow. There had been fewer bankruptcies and defaults, and corporate credit quality continued to improve, he said. 'There's a shortage of corporates in the pipeline,' Mr Dowding said. 'Yet, demand for corporate bonds will continue to grow as long as interest rates remain at low levels.' This supply and demand imbalance would drive the spread tighter next year, at a pace similar to this year, Mr Dowding added. He is most upbeat on corporate bonds in emerging markets. These markets had the potential to be upgraded and those that were oil-producing nations would benefit from high crude prices, he said. Mr Dowding also expected the US dollar to remain weak - falling to US$1.32 against the euro and 100 Japanese yen in the medium term - and advised holders of US dollar-denominated bonds to hedge against the risk. a fresh look at Europe Investors have been neglecting European equities due to the lagging economic growth in the region, but fund managers at Standard Life Investments see an opportunity on the continent for global investors. Andrew Milligan, head of global strategy at the fund house, said Asian equities would continue to outperform European and US equities, but European markets would do better than their US counterparts. 'You should think of Europe as the parallel of Japan. Two years ago, nobody liked Japan or believed in the country's structural reforms,' the global strategist explained. 'The situation is similar in Europe.' According to Richard Moffat, investment director for pan-European equities with Standard Life Investments, the valuations of European stocks are cheap while corporate earnings growth is - in historical terms - relatively strong. 'Investors should look at the micro reforms on a corporate level, rather than the macro picture,' Mr Moffat said. 'Due to increasing global competition, structural reform is taking place amongst companies to drive down labour costs, improve efficiencies and enhance corporate profits.' He likes British banks for their high yield and cheap valuations, as well as IT plays such as Infineon Technologies and Siemens, which will benefit from restructuring and cheap valuations. Mr Moffat is underweight in food, consumer staples and utility plays.