Property black spot ahead

Investment managers aren't expecting great things from property or international shares in the next 12 months, according to the latest Aon survey.

Wednesday, April 26th 2000, 12:00AM

Investment managers have slightly brightened their view on what returns can be expected in the major asset classes over the next 12 months.

The latest Aon Consulting Investment Forecasts survey for the period ending March 31 shows that managers have revised upwards their forecasts for all the asset classes except New Zealand fixed interest and property.

The survey asks 10 fund managers what they estimate the annual rate of return before tax and expenses will be for each of the asset classes in the 12 months to March 31, 2001

Their view on New Zealand fixed interest returns remains unchanged at 6.8 per cent, since the previous survey three months ago. However, they have substantially cut back their view on what returns can be expected in the property sector.

According to the survey managers are predicting property will return 7.6 per cent over the next year. This is a full one per cent lower than what they estimated three months ago.

Asset class	Expected average return over next 12 months	Change from last quarter	Expected five year returns
Cash	6.8	+0.6	6.3
Fixed interest	6.8	NC	6.6
Property	7.6	-1.0	8.3
Equities	15.3	+1.9	12.1
Intl fixed interest	6.0	+0.1	6.4
Intl equities	6.5	+0.4	11.2
Inflation rate	2.1	-0.2	1.9

Source: Aon Consulting

The other big mover was New Zealand shares. Here managers have ramped up their expectations by 1.9 per cent to 15.3 per cent which puts them well above (26 per cent) the expected five year returns.

One of the odd things in the survey is that international equities are right out of favour with the managers. They are saying that this asset class will only produce returns of 6.5 per cent in the next year versus 11.2 per cent in five years.

The 10 managers surveyed are AMP Asset Management, ANZ Funds Management, Armstrong Jones, AXA, BNZ Financial Services, BT Funds Management, Guardian Trust Funds Management, New Zealand Funds Management, Tower Asset Management and WestpacTrust Investment Management.

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