Fund managers optimistic about stocks markets in 2010

Fund managers across the world are confident about higher equity returns this year and believe that economic growth, though modest, will manifest a continued global recovery, a survey by global professional services firm Towers Watson said.

According to the survey, the investment managers surveyed show more optimism this year as compared to last year.

The survey found that respondents expect stock markets to revert to historical return levels in the next 10 years, while predictions about returns in 2010 are higher than these levels.

According to managers, anticipated returns on global equities in 2010 is 10 per cent (compared with expectations of 6.7 per cent in 2009).

The US, UK, Euro zone, Australian, Japanese equity markets expect to deliver around nine per cent returns this year, while Asian equities are forecasted to give 14.5 per cent gains.

Expected equity volatility for 2010 is in the 15-22 per cent range, substantially down from the high ranges seen in the past two years, the survey revealed.

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

"In addition, there is a greater optimism than last year reflected in, among other things, an increase in the expected propensity of investors to take risk in 2010 and managers' commensurate bullishness about risky assets," Hess added.

A further indication of optimism is the broadly held view in all markets except Japan, that government policies on the economy would be conducive to market stabilization and even to real economic growth in the next five years, the survey noted.

The Towers Watson survey of investment managers indicated that there is a strong West/East divide over the economic outlook for the next five years, with the West either having a delayed recovery or stagnation and the East (with the exception of Japan) expected to experience a boom.

Moreover, most managers hold overall bullish views on emerging markets (87 per cent), public equities (74 per cent), commodities (71 per cent), private equity (49 per cent), high-yield bonds (46 per cent), real estate (43 per cent) and hedge funds (40 per cent) for the next five years.

The survey was conducted in 2009-end and includes responses from 98 investment managers globally, who collectively have around USD 13.3 trillion assets under management.