Fund managers’ equity return expectations on the rise

Fund managers have become more optimistic about the prospects of equity returns in 2013, according to Towers Watson.

Its global survey of investment managers found managers expected better equity returns in most markets with the exception of Australia and the US, where equity return expectations are at their lowest since the survey started in 2008.

Managers thought equity returns would remain muted over the long term, but indicated a preference away from the Eurozone towards China and the US.

They expect equity markets to deliver returns of 7 per cent in the US (compared to 8 per cent in 2012), 6 per cent in the UK (5 per cent), 7 per cent in the Eurozone (6 per cent), 6 per cent in Australia (7 per cent), 6 per cent in Japan (5 per cent), and 10 per cent in China (7.8 per cent).

VIEW ALL

View all

Expected volatility was in the 15-20 per cent range, Towers Watson said, which was somewhat lower than previous years but still elevated when compared to long-term averages.

Most managers held five-year bullish views on emerging market equities (83 per cent compared to 75 per cent in 2012), public equities (78 per cent compared to 72 per cent), and real estate (57 per cent compared to 48 per cent).

For the same period, managers were bullish on nominal government bonds (80 per cent compared to 77 per cent in 2012), money markets (47 per cent compared to 43 per cent), investment-grade bonds (47 per cent compared to 29 per cent), and inflation-indexed bonds (held at 47 per cent).

Real GDP growth expectations for 2013 continued a downward trend, Towers Watson said, and ranged just above 0 per cent in the Eurozone, 7.5 per cent in China, 2.5 per cent in Australia, 2 per cent in the US, 1 per cent in the UK, and 0.9 per cent in Japan.