Fund managers confident of strong equity returns in 2010

Fund managers are predicting modest global economic growth and higher equity returns in 2010 but are less positive about bond and credit markets, according to a survey conducted by global professional services firm Towers Watson.

Managers anticipated overall returns on global equities of 10 per cent, up from 6.7 per cent in 2009, with the high expectations driven by emerging markets. Expectations of returns in non-Japanese Asian markets were 14.5 per cent, compared to around 8.5 to 9 per cent for most Western markets.

“The overall picture we get from this influential group is one of recovery, with established Western markets lagging the emerging markets on most measures,” said Carl Hess, global head of investment at Towers Watson.

There was “an increase in the expected propensity of investors to take risk in 2010 and managers’ commensurate bullishness about risky assets”, as well as a view that government policies would be conducive to market stabilisation and economic growth, he added.

Responses revealed significant uncertainty about yields on both short and long-term corporate and government securities, while credit markets were likely to remain unpredictable for the foreseeable future.

Real gross domestic product growth was expected to be around 1.5 to 3 per cent in Western markets, and up to 7 per cent in parts of Asia. Unemployment was thought to have peaked but was expected to remain high by historic standards, and all marketplaces were thought to have reached the bottom of the housing market, with the exception of the US.