GLOBAL – The rising global dependency ratio in the developed world will continue to encourage low inflation and low bond yields, says fund manager Standard Life Investments.

In its research report, Global Horizons 2003, Standard Life gives an annual perspective of long term investment themes, noting major changes in financial markets set to occur in the coming years.

With regards to bond yields, Standard Life forecasts a continued low yield environment as the dependency ration rises. Currently there are 0.7 dependants for every worker in the developed world, having fallen from 0.8, 25 years ago. This ratio in the developed world is expected to rise to 0.9 by the year 2050. As the proportion of savers and pensioners in the population rises, inflation tends to be low, ultimately benefiting bonds, says Standard Life Investments. It is not believed, however, that deflation will appear in the US and Europe.

Also in the report, Standard Life forecasts equity markets as remaining volatile for some time still. “As companies continue to drive down costs and control inventories, investors should continue to prepare for stock market volatility for some time,” says Julian Coutts, head of risk at Standard Life.

That said, Standard Life believes now to be a good time to invest in equities. Says Ken Forman, global strategist: “As we approach the end of the third consecutive year of bear market conditions, all the evidence suggests that if you want to be a millionaire and quickly, then now would be a good time to start regular investment in equities.”

Standard Life Investments is the 62nd largest manager of European pension fund assets, with 6.6 billion dollars of such assets under management.