Concern About Inadequate Retirement Income from DC Plans
The global survey of fund managers, who collectively have assets under management of over
According to the survey, which was conducted at the end of 2008, managers hold overall bullish views of returns on public equities, investment grade bonds, high yield bonds and emerging markets over the next 5 years. However, for the same time horizon, they hold fairly bearish views of returns on hedge funds, government bonds, money market and real estate, while remaining largely neutral on private equities and currencies.
Regarding equities, respondents expect stock markets to revert to historical return levels by 2012, while predictions about returns in 2009 vary significantly by region. According to the median view of managers, anticipated returns on global equities in 2009 is 6.7% with U.S., U.K., Eurozone, Australian, Japanese and other Asian equity markets expected to deliver 8.8%, 5.0%, 5.5%, 8.0%, 5.0%, and 10.0%, respectively. The survey also shows expected equity volatility for 2009 in the elevated range of 20-25%, higher than the historical average but lower than that experienced during 2008.
With regard to bonds, the survey indicates that real yields on government securities, both short and long-term, are likely to remain low and comparable to the depressed levels of late 2008. However as the global economy recovers, government yields are expected to increase while corporate spreads shrink correspondingly - this shift being in a 100 to 200 basis point range and taking three years to complete.
In terms of the tools required for investment success in 2009, managers' top three are: adequate risk controls, portfolio diversification, and added value through active management, while they expect the top issues among their clients to be risk management, asset allocation and underperformance.
The survey also covered managers' macroeconomic forecasts, and reveal a consensus about a recovery in the US housing market being underway by the third quarter of this year; about the same time as the start of a recovery in the other main markets. However, a significant number of respondents indicate that problems could linger until 2012 in the Japanese housing market. Regarding the crude oil price, the consensus is that it is expected to reverse its current sharp downward trend and move to around
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SOURCE Watson Wyatt Worldwide