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Global funds predict recovery in 2009

Fund managers are predicting a recovery in global equities in 2009 with returns reaching 6.7%, but volatility will remain above the historical average, investment consultant Watson Wyatt said.

World stocks as measured by MSCI fell 43.54% in 2008. A survey of 104 global asset managers with $10 trillion of funds under management revealed expectations of a recovery in a number of asset markets following steep declines last year. The fund management industry has seen assets decline due to trading losses and investor withdrawals.

Equities fund managers are most bullish on Asia, predicting returns of 10% for the region in 2009 with UK and Japan stocks expected to lag behind others with returns of 5%. Fund firms expect equity returns will revert to historic levels by 2012 following the 40% decline in the past year.

The survey showed fund managers expect a recovery in the US housing market will be underway by the third quarter this year while the price of crude oil is expected to rise to about $60 per barrel in 2009 and to $80 by 2012. US light crude for February delivery fell $1.97 to $38.86 by 1212 GMT.

Fund managers expect real yields on long and short-term government securities to remain low though rising as the global economy recovers while spreads on corporate bonds are expected to fall by between 100 to 200 basis points over the next three years. (Reuters)