GLOBAL - Equity volatility remains high in 2009, while real yields on government securities are likely to remain low, according to a global fund manager survey by consultancy firm Watson Wyatt.

The global survey of fund managers, with collective assets under management of over $10trn (€7.3trn), conducted at the end of 2008, found managers still hold overall bullish views of returns on public equities, investment grade bonds, high-yield bonds and emerging markets over the next five years.

Simultaneously, however, there is a bearish views of returns on hedge funds, government bonds, money market and real estate, while most are largely neutral on private equities and currencies.

Moreover, fund managers believe a recovery in the US housing market will be underway by the third quarter of this year; about the same time as they predict the start of a recovery in the other main markets.

Respondents overall said they expect stock markets to revert to historical return levels by 2012, while predictions about returns in 2009 vary significantly by region.

"According to the median view of managers, anticipated returns on global equities in 2009 is 6.7% with US, UK, Eurozone, Australian, Japanese and other Asian equity markets expected to deliver 8.8%, 5.0%, 5.5%, 8.0%, 5.0%, and 10.0%, respectively," said Watson Wyatt.

The survey also suggested expected equity volatility for 2009 will be in the elevated range of 20-25% - higher than the historical average but lower than that experienced during 2008.

In terms of the tools required for investment success in 2009, managers' top three are adequate risk controls, portfolio diversification, and added value through active management, while they expect the top issues among their clients to be risk management, asset allocation and underperformance.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email