Greece troubles making fund managers wary

Fund managers have a more cautious market outlook due to sovereign risk concerns in Greece and other European countries, according to the latest Investment Manager Outlook (IMO) survey by Russell Investments.

The quarterly survey of investment managers saw most forecasting lower returns across all asset classes this quarter — except cash.

“Following the overwhelming recovery of global investment markets in 2009, the outlook from the March 2010 survey was relatively subdued,” said Russell Investments associate portfolio manager Scott Bennett.

“Investor sentiment has been weighed down by concerns in international economies, and rising interest rates domestically,” he added.

The survey revealed three quarters of managers were pessimistic about the outlook for bonds, while only 17 per cent of managers expected A-REITs to perform well over the next 12 months.

“Despite the huge amount of deleveraging that has occurred in the A-REIT sector, most managers are still very wary of this investment class, given expected interest rates rises. It’s a similar story for local bonds, whose value will fall with rising rates,” said Bennett.

Mangers were also less likely to invest in riskier assets, with the number of those bearish on international shares rising to 39 per cent — the highest rate since the beginning of the global financial crisis. At the same time, those expecting international shares to perform well fell from 52 to 39 per cent.

The outlook for the Australian dollar remained balanced, with 44 per cent of managers expecting the value to appreciate from its average value of US90 cents over the survey period.