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Australian superannuation fund trustees have been warned to brace for more modest returns in 2006.
That is the bottom line finding of the latest Mercer Investment Consulting, which said that investment managers were expecting the performance of equities in 2006 to lag behind the double-digit returns of last year.
The Fearless Forecast is based on the views of investment managers from 157 firms worldwide that have more than $US20 trillion in assets under management.
According to the survey, global equity markets are expected to achieve a median return of 7.6 per cent this year, which compares to a 9.5 per cent return for the in 2005 and annualised historical returns for the past three years of 19.3 per cent.
The survey also found that investment managers expected Australia’s real gross domestic product growth for 2006 to be 3.3 per cent, compared with median global gross domestic product growth of 3.1 per cent. The cash rate is expected to be 5.5 per cent in 2006, compared to 2.7 per cent in Europe and 3 per cent in Singapore.
The survey said Australia was expected by global investment managers to have among the world’s best-performing bond markets in the coming year and noted that, despite this, Australian managers were predicting bond returns to again be only a little in excess of cash rates.
The survey said that listed equities, hedge funds and infrastructure investments were expected to be among the top performing asset classes in Australia this year.
It said Japan was expected to be the outstanding equity market in 2006, with US equity performance expected to improve, but only to an extent that would see it move more closely in line with the performance of developed markets in Europe, Australasia and the Far East.
AUTHOR
Mike Taylor
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