GLOBAL - Emerging markets are set to deliver the highest returns during the next 11 months, with alternatives losing favour, according to a survey by William M Mercer Investment Consulting.
In a year that is likely to see global equities rebound, the lustre will wear off alternatives, particularly private equity and venture capital.
Sixty-one US and international money managers responded to Mercer’s 2002 ‘US Fearless Forecast survey ‘ on expectations for the US economy and domestic overseas markets.
Overseas returns were predicted only slightly more than the US, though the degree of confidence in the estimates is weaker.
Respondents also predicted growth stocks slightly outpacing value and small caps outperforming large caps.
Commenting on the findings, Barry McInerney, head of Mercer’s US investment consulting practice, said: Institutional investors have now experienced two consecutive years of sluggish performance.
The expectations for 2002 are for renewed confidence in the capital markets. However, 2002 forecasts are only calling for high single-digit returns for a typical fund.
Bu the outlook for US fixed income performance is less optimistic, highlighted by a predicted increase in the Fed funds rate to 2.5% from 1.8% at the end of last year, and weaker core bond returns.
In short, longer-term predictions continue with favourable expectations for growth over value, small caps over large caps, and the US over non-US markets. From an asset allocation perspective, managers favoured allocations to large cap equity, fixed income, international equity, and small cap equity, in that order. But despite the findings, US plan sponsors are still turning to alternatives and away from traditional domestic asset classes as a method of boosting investment returns, said Mercer.
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