Planners optimistic on ‘05 returns

Most advisers think the Australian sharemarket will continue to offer investors positive returns in 2005, but don’t think they will be as robust as they were in 2004.

According to Deutsche Asset Management’s (DeAM) annual adviser survey, 60 per cent of the 1,407 advisers it questioned were ‘confident’ or ‘very confident’ that equity markets would continue to rise over the coming 12 months, despite recent record highs.

Only 7 per cent were ‘uncertain’ or ‘entirely doubtful’ of a rise in equity markets, while 33 per cent were ‘mildly confident’.

DeAM’s head of retail in Australia Alan Miller said the general sentiment expressed by advisers was that returns for 2005 would be in the high single or modest double digits, “but nothing like what we got in 2005, which was close to 30 per cent”.

“And if you look at what the analysts are saying, most of them are predicting returns around the 8 per cent to 10 per cent mark,” Miller said.

“But some people were saying that last year,” he added.

Given 2004’s stellar returns when the S&P/ ASX 300 rose 27.9 per cent, the survey found advisers were less inclined to use absolute returns funds in their clients’ portfolios in 2005, although interest in these funds was still strong, with 40 per cent saying they were ‘increasingly considering’ using them. Tax effective funds also ranked strongly, with 32 per cent giving them serious consideration.

“A possible explanation for this shift is that hedge funds have become increasingly mainstream, offer solid performance, and have a low correlation to normal market movements. Tax-effective funds, particularly those offering income streams, are likely gaining ground as baby boomers enter retirement,” Miller said.