This year’s rocky market conditions will favour investors putting money into the “least worst” ideas rather than trying to find breakout winners, according to Katana Asset Management.

Fund co-founder and portfolio manager Romano Sala Tenna said investors have benefited in the past year from conditions that made it easier to make money than to lose it.

This year, however, he says investors may see a reversal of this good fortune.

“It’s going to be easier to lose money than to make it this year,” he said.

The challenge for investors, Mr Sala Tenna said, stems from both the market’s negative outlook and the way the market has positioned itself for this eventuality.

“There’s always two things to consider: the outlook, and our view on how the market is positioned for that outlook,” he said.

“We see the outlook for 2022 as being negative but we see that the market is positioned well and truly for that outlook, so we don’t think we’re going to see the level of retracement we might have seen in previous cycles where we’re walking into a difficult patch but with a euphoric positioning.”

Mr Sala Tenna pointed to the US, where net long positions held by hedge fund managers have fallen to four-year lows, as evidence that investors are already bracing for what’s to come.

This anticipation means investors might see markets remain range-bound throughout the year, and subsequently make losing money easier than making it in the 12 months ahead.

“It’s a question not of what you invest in, but what you don’t invest in and I think a lot of the classic things we’d invest in are becoming harder to,” he said.

“It becomes a case of finding the least-worst opportunities as opposed to the best.”

Mr Sala Tenna said he and his team favour businesses with pricing power under these conditions, adding that sectors which benefit from inflation – such as energy, materials and banks – could also do well in the coming months.

Join Romano Sala Tenna this Friday, 6th May, at 12pm (AEST) on our fortnightly The Insider: Meet the Fund Manager webcast to hear him talk about his favourite stocks, investment strategy, market insights and more. There will also be an opportunity to ask questions during the session. To book yourself in, click here.

Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets’ position