U.S. and Canadian money managers surveyed by Mercer (Canada) expect 2014 to see strong overall equity returns, with U.S. and Canadian stocks being outpaced by international and global stocks, while Canadian fixed income is forecast to lag the 1.7% anticipated rate of inflation in the country.
According to the survey of 47 managers, non-North American and global equity should each return around 9% this year; U.S. and Canadian stocks, each 8%; Canadian bonds, 1.5% vs. the expected 1.7% inflation rate; Canadian real estate, global infrastructure and hedge funds, 5% to 6%; and private equity, 9.5%.
Managers also expect Canadian GDP growth, at 2%, will trail the 3.5% forecast for global GDP.
Jaqui Parchment, partner, head of investments (Canada) at Mercer, said in a news release on the survey that Canadian defined benefit plans “will capitalize on last year's excellent equity returns and diversify into other growth assets, mainly alternative asset classes. … We also expect more risk-averse investors to continue the trend of dynamic derisking, moving out of equities into bonds, especially as bond yields continue to rise and/or funded positions improve.”
The survey was conducted in the fourth quarter.