Fund managers are more cautious about the prospects for world growth and investment returns, according to a global survey of investment managers conducted by global professional services firm Towers Watson.

The findings are in contrast to last year's survey when managers expected the recovery to remain on track and were bullish on public equities and emerging markets.

"The global economic recovery remains as elusive and fragile as ever, set as it is against the unavoidable facts of extreme indebtedness in the Western world and weak and uncertain prospects for growth in most markets. The second half of 2011 was a reminder that these fundamentals hadn't gone away and have clearly influenced managers' outlook for 2012. As such this influential group of investment managers have shifted from expecting a continuing path to recovery and the avoidance of a double-dip recession in some markets, to anticipating a more volatile and patchy period defined by increased levels of risk, some growth and significantly lower returns," said Carl Hess, global head of investment at Towers Watson. "Their optimism from last year, and the year before, is replaced by a less sanguine view about investors' propensity to take risk in 2012, with managers' significantly reducing the returns they expect from risky assets. A further indication of the change in sentiment from the past two years is their view that most economies are expected to have significantly lower growth in 2012 than they had expected in prior years."