India, China and quoted companies that own and manage property are among the investment hotspots for 2007, according to NCB.

The wealth management division of the stockbroking firm has selected its top 12 fund picks of the year, based on economic outlook, analysts' forecasts, and the fund managers' track records and charging structures.

Although equities should outperform cash and bonds in 2007, volatility will remain a feature of equity markets, making it essential that investors are exposed to the right sectors and regions during the year, NCB notes.

European equities are still fundamentally better value than the US, it believes.

"The funds we have selected have no great exposure to the US bar in the managed funds. Where we have gone sector-specific, we have chosen Europe, India-China and the Pacific Basin," says Killian Nolan, an investment funds analyst with NCB wealth management.

The growth engine of the world will be India and China, and ongoing industrialisation in these regions has spurred great global demand for commodities, which NCB labels "structurally very sound".

India and China, with a combined population of 2.5 billion, are commodity-poor, labour-rich areas, it notes.

"If industrialisation continues as we expect, investors should consider exposing a portion of their portfolios to these regions."

The two funds selected by NCB in the region are the Standard Life Pacific Basin multi-manager fund and the Fidelity India-China fund.

The latter is the classic example of a fund that has high management charges but which is worth the extra expense given its track record of outperformance, according to Nolan. "The Fidelity fund has a charge of 2 per cent per annum, but if you look at the performance on it, it has been justified. Fidelity has a very strong research team," he says.

One development since last year is the emergence of the global Real Estate Investment Trust (Reit) market.

A Reit is a quoted company that owns and manages commercial and residential property, most of which will produce rental income.

Even though Reits are traded on the stock market like equities, the returns over time are more closely aligned with the returns that would be generated by direct property investment, according to NCB, which has picked out Standard Life's recently launched global real-estate investment trust fund.

"They are an excellent way to get exposure to the property market but keep the liquidity of a share," says Nolan.

NCB places the Standard Life Reits fund somewhere in the middle of its risk spectrum, with the Fidelity India-China fund the most risky fund out of the 12.

"In May of last year it did drop 20 per cent in a month. It has recovered all of that back, but there is a volatility there that is not for the faint-hearted," says Nolan.

"Having said that, although it will be volatile in the short term, these economies are certainly on the up and up."

At the lowest end of the spectrum in terms of risk is the New Ireland security managed fund, which is designed for the more cautious investor with an average equity holding of just over 40 per cent.

"If you look at the asset split on the New Ireland security managed fund, 58 per cent of it is in fairly secure assets: fixed interest, property and cash," says Nolan.

The equity portion also invests in solid blue-chip names such as AIB and Anglo Irish Bank.

This won't be a fund to get too excited about in times when equity markets are surging ahead, but it is an "ideal stepping stone" for investors who usually opt for cash deposits, but are willing to take on a small degree of risk in exchange for the chance to secure higher returns, Nolan says.

Other interesting funds in the 12 picks include Canada Life's dividend bond, which NCB has selected as a result of numerous enquiries from people looking for a regular income stream from their investments.

The Canada Life bond pays out the dividends from the underlying stocks in the fund twice a year.

It would be more tax-efficient to invest in a bond like this than it would be to purchase individual high-yielding shares.

Standard Life's UK smaller companies fund is also in the mix. The management team's emphasis on regularly meeting with the management of mid-cap companies and making site visits helps give their research team an edge in an under-researched sector, Nolan believes.

"It's not going to make up a significant part of someone's portfolio - there is volatility there - but it is exciting and it is outperforming."

NCB's other fund picks are: the New Ireland property fund; the Eagle Star balanced managed fund; the Hibernian socially responsible investment fund; the Standard Life balanced multi-manager fund; the Fidelity European opportunities fund; the Eagle Star five star five European fund; and the Standard Life Pacific Basin multi-manager fund.

However, NCB cautions that it is often difficult to predict what the best-performing funds will be.