Global large-cap equities will have an average risk premium over Treasury bills of between two and six percentage points over the next 10 years, according to most CEOs, CIOs, portfolio managers and investment analysts surveyed by the CFA Institute.
Of 419 respondents, 9% believe the risk premium will range from zero to two percentage points; 43%, two to four points; 42%, four to six points; and 6%, higher than six points. No one believed the risk premium would be negative.
To weather the current market environment, 38% of 385 respondents advised clients to increase allocation to cash, 29% each to equities and alternatives, 26% to commodities and 17% to fixed income.
Also, 52% said the U.S. dollar will continue to be the world’s reserve currency in 10 years, while 42% said it would not and 7% said it would lose that status within two years.
On the influence of sovereign wealth funds, 77% of respondents believe they are a critical source of liquidity for global capital markets and 38% believe they are a threat to economic autonomy. The SWF results were tallied from a combination of questions.
The U.S. and U.K. will take the longest among select countries to recover from the global credit crisis: 75% believe the U.S. and 70% believe the U.K. will both take 12 to 18 months or longer to recover. A recovery in 12 months or fewer is forecast for India by 49% of respondents; China, 48%; Russia, 46%; Canada, 45%; Hong Kong and Brazil, 44% each; and Germany, 38%.
