Some 64% said these funds would beat global equities on average over the coming year. Within the region Poland and Hungary were the managers’ top choices for best equity investment over the next year.
Managers expected less out of Russia in the 2005. Only 40% said Russian shares would outperform global shares. The forced auction of a Yukos subsidiary last year has severely dented managers’ confidence in Russian investments. Just over a third of those surveyed said that action had changed their view of investing in Russia very negatively while 44% said slightly negatively. Generally, managers said that investors underestimate the risks of investing in the Russian stockmarket.
Looking globally Europe excluding the UK rose to the top choice for best performing stockmarket over the next 12 months. Some 32% of managers said it would do best while Asia and Japan tied for second place with 21% each. America remained bottom with 57% saying it would be the worst performer.
The outlook for America’s currency was just as unfavourable with 69% saying it would be the weakest of the major currencies over the next year. The euro was excepted to be the strongest with the yen in second place.
Global stockmarket
Sentiment on growth shares rallied this month as 32% said a growth investment style would be the best performing this year – up from 18% in December. Large firms are also supposed to dominate as 64% said large caps would outperform their smaller counterparts. The outlook for global equities, as measured by the MSCI World index, was fairly spread out with most expecting a return of 5-10%. About one-fifth each said 0-5% and 10-15%.
Managers chose telecommunication as the best performing sector over the next 12 months with energy and financial services in second and third place with 21% and 15%, respectively. Utilities and hardware were expected to perform the worst.
Government bonds in developed markets were predicted to be the best performing fixed income instrument over the coming year. High yield corporate bonds were the next favoured with 30% of managers’ vote.
In terms of fund launches almost all groups were planning to open new funds in 2005 with equity funds dominating the new products. Half of managers chose share funds while alternative funds garnered 26% and balance funds a fifth.
Morningstar’s European offices conducted the survey from January 17th-24th. Some 47 fund groups from 12 countries participated. On average they each managed €55billion (£38 billion) and offered 103 retail funds.
