Aussie managers optimistic for 2003

Australian fund managers remain widely optimistic regarding the likely performance of capital markets in 2003 according to a survey conducted by Mercer Investment Consulting.

Mercer’s ‘Global Fearless Forecast 2003’ survey included 33 Australian fund managers among the total 180 managers surveyed world wide with most of the Australian managers surveyed tipping the economy to continue to perform well.

“They expect unemployment to stay low at 6 per cent, inflation to fall and local shares to recover,” Mercer Investment Consulting executive director Tony Cole says.

The issues Australian managers fear may potentially damage good domestic economic growth include the protracted drought and a slump in residential property sales.

A war in the Middle East and the Bush Administration’s ability to lift the US economy were also regarded as important issues facing global markets this year.

The survey also found that of the Australian managers involved, nearly 70 per cent disagreed with the idea of paying down the national debt from asset sales, maintaining that continued budget surpluses are not sustainable.

Just over half of the respondents believed market volatility will remain the same in 2003, while another third expect to see it fall below last year’s levels.

According to the survey, large caps “should outperform the small, but only by a slim margin”, with positive, single digit returns in equities expected to come mainly from the large caps, while property trusts are expected to underperform the benchmark over the next three years.

The worst performing sector of 2002, the IT sector, is expected to continue to struggle, while the second worst performing sector, healthcare, is expected to swing towards positive returns this year.

The Australian managers surveyed are expecting the popularity of alternative assets such as private equity, infrastructure and hedge funds to continue, with over a quarter predicting that allocations in these areas will rise to between five per cent and 10 per cent by December 2005.

The overall outcome saw managers advocate a higher allocation to alternative asset classes, particularly hedge funds, by way of lower allocations to Australian and overseas equities.