Return expectations rise

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Expectations about investment returns over the next 12 months have picked up significantly.

Wednesday, November 10th 1999, 12:00AM

by Philip Macalister

The survey asks nine fund managers what they estimate the annual rate of return before tax and expenses will be for each of the asset classes.

Managers are predicting stronger returns in all bar one sector over the next 12 months. The only sector not to record a change was international fixed interest, which remains unchanged at 5.3 per cent.

The biggest single increase was in New Zealand equities where managers have raised their expectations from 11.9 per cent to 14.0 per cent. All the other asset classes, cash, NZ fixed interest, property and global shares have all risen by 0.6 per cent.

 While the short term view is overwhelmingly positive, the news five years out is not so good. There managers have lowered their expectations for three of the six asset classes, namely local and global equities and NZ property.

This quarter marks a significant turnaround in sentiment, as return expectations have fallen over the last two consecutive quarters.

Aon's survey of economists paints a fairly stable future forecast. The average view was that inflation will pick up marginally, 0.1 per cent to 2 per cent in the next year, while the rate of increase in the average weekly wage will fall 0.2 per cent to 2.5 per cent.

Real interest rates, that is the yield on 10 year Government Stock, in excess of inflation, will rise 0.2 per cent to 4.9 per cent and the rate of growth of real GDP will stay stable at 3.4 per cent.

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