GLOBAL - World equity markets are expected to slowdown but will post "reasonably strong" returns for 2005, with global managers expecting the MSCI World Index to return 7.7% in 2005, down from 2004's 20.2%.
Mercer Investment Consulting, which surveyed 33 managers managing in excess of US$8trn in global assets for its Fearless Forecast survey, found emerging market predictions for 2005 were down from last year’s with managers predicting an average return of 10.4% for the MSCI Emerging Market Index.
Tim Gardener, global leader of Mercer IC said: “Global equity market returns were less spectacular than those seen in 2003, but still reasonable. In their predictions for 2005, most investment managers are expecting more of the same, with positive returns just under 10%.
“More generally, managers are predicting a quiet year, with noticeably less support for hedge funds.”
More than three-quarters of the global managers predict that private equities and commodities will produce the highest five-year return among alternative instruments. Hedge funds came in a distant third place.
For the second year in a row, global managers predict that Japan will be the most attractive equity market. The UK showed second in the managers’ predictions, with third and fourth rankings closely contested among the managers, with no strong consensus. The US and Germany are predicted to be the least attractive equity markets in 2005.
Bond market spreads are expected to widen in 2005. Global managers forecast the UK and Eurozone to be the most attractive country bond markets, with US and Japan the least attractive.
Gardener added: “The most pressing need for many plan sponsors is to reassess and, where necessary, reposition their asset strategies to meet the challenges posed by under funding and new accounting standards.
“If this can be done in an environment that is free from any pressures caused by investment fashion or perceived market misvaluations, then the decisions made are likely to be much better. In the medium term, we see the key equity decision as being how the investment strategy handles the likely shift in economic power from the West towards the East.”
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