Managers predict softer returns in intl markets

Global investment managers see positive 2006 equities performance, but returns not expected to match 2005 in most major world markets.

Wednesday, January 11th 2006, 2:47AM

Investment managers expect that performance of equities in 2006 will lag 2005 double-digit returns for major global equity indices, with a particularly sharp decline in the outlook for emerging markets, according to Mercer Investment Consulting’s annual Fearless Forecast survey.

Global equity markets will achieve a median 7.6% return in 2006, the global investment managers in the Mercer survey predicted, which compares to a 9.5% return for the MSCI World Index in 2005 and annualised historical returns for the past three years of 19.3%.

The managers predicted a median return of 8.0% in 2006 for the MSCI EAFE (Europe/Australasia/Far East) Index, which compares with a 13.5% return posted in 2005. However, there was wide variation in the predictions, from 3.0% to 13.2%.

Consistent with this wide range, investment managers in all regions surveyed expect more volatility in the equity markets in 2006 compared to 2005, particularly outside the United States.

US equity performance is expected to improve in 2006, but only to move more closely in line with the performance of developed markets of Europe, Australasia and the Far East.

Survey respondents managing global assets expect the MSCI USA Index to return 7.5% in 2006, an improvement from the 5.1% return in 2005.

Turning to developing markets, the global investment managers in the survey forecast a median return of 9.0% in the MSCI Emerging Markets Index in the coming year, sharply below the dramatic 34.0% return achieved in 2005.

Bond market yields are expected to rise, according to the global investment managers surveyed, and to deliver a median 4.0% total rate of return for the broad global bond index. The majority of investment managers in the survey expect both investment grade and non-investment grade spreads to widen in 2006. The best performing bond markets in 2006 are expected to be in Australia, the United States, the United Kingdom, and New Zealand.

The survey covers 157 investment managemet firms worldwide, which have more than US$20 trillion in assets under management. The investment managers, based in Europe, North America and Asia Pacific, were asked for their global and regional views on the economy and capital markets for 2006. Respondents were asked to make investment forecasts in US dollar terms.

« OM-IP funds reach significant milestone

Sovereign takes regulation bull by the horns »

Special Offers