Fund managers are more optimistic about the outlook for equities this year, although they are still concerned about medium-term government bonds and world growth, according to a survey of investment managers and economists from Towers Watson.
The survey included responses from 128 professionals with years of experience and trillions of dollars of assets, both institutional and retail, under management.
"What surprised us was the response to what clients will be doing in terms of their portfolios with regard to risk. More people this year thought their clients would actually add risk," Matt Stroud, Towers Watson's head of investment strategy, Americas, told BenefitsPro.com.
Recommended For You
The survey found that 44 percent of the respondents believe the investment strategies of their institutional clients will become more aggressive next year, up from a third of managers in 2013.
The majority of managers also expect the world's biggest economies to experience mild growth, with the exception of the Eurozone, where they expect unemployment to be in the low double digits in the short term and in the high single digits for years if not decades, Stroud said.
Several of the managers also expressed concerns about government intervention in developed markets, including monetary, fiscal, legislative and regulatory measures.
Managers for the most part expect interest rates to remain low and are largely bullish on developed market government bonds and investment-grade bonds.
But in contrast to last year, managers predicted better equity returns this year in most markets, with the exception of the U.S. and China. They expected equity markets in 2014 to deliver returns of 6.9 percent in the U.S. (compared to an expectation of 7.0 percent in 2013), 7.0 percent in the UK, 8.1 percent in the Eurozone, 6.4 percent in Australia, 7.3 percent in Japan, and 8.4 Percent in China.
"The implications for portfolios and capital allocations are that we come back to the belief in diversity in return drivers. So we are not heavily loaded on any single return driver. At the end of the day, we look to diversify across equity risk, liquidity risk, insurance risk, inflation risk, all risk," said Stroud.
"It's all about getting to the long term with as smooth a ride as possible, having strong returns but avoiding risks."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
