EUROPE - Investment managers predict European equities will continue to recover this year, a survey by Mercer Investment Consulting shows.
The research – based on replies from 55 European fund managers with £3.4trn assets under management – showed that managers expect returns of 8% for UK equities and 10% for European equities.
Average annual returns are expected to be between 5% and 10% over the next three years. This compares with expected global equity market returns of 8% throughout 2004, according to separate research by the consultant.
Most managers believe fixed interest yields will rise but some think bond returns will be negative. UK and European government bonds are forecast to produce returns of 3% in 2004, with similar returns expected over the next three years.
Over the next three years, managers expect to see increased demand for tactical asset allocation. Managers also predict that hedge funds and private equity will be the major growth areas within the alternative investment sector. Emerging markets also remain in favour with forecasted returns of 12.5%.
Head of UK investment consulting Andrew Kirton said:
“Low inflation, increased demand for alternative and absolute return assets, a testing regulatory environment and greater emphasis on shareholder participation will all be testing but there is a little out there for specialist players.”
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