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Hot Topic NBR Focus: GMO
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Tepid outlook for global investors - AMP

The outlook for equity market investors is decidedly below par, the country's largest fund manager says.AMP Capital's quarterly release of its results today comes with a glum assessment of prospects.Most of the sectors AMP invests in showed a poor or neg

Rob Hosking
Wed, 28 Jul 2010

The outlook for equity market investors is decidedly below par, the country’s largest fund manager says.

AMP Capital’s quarterly release of its results today comes with a glum assessment of prospects.

Most of the sectors AMP invests in showed a poor or negative return for the June quarter.

The company’s balanced fund fell 4% in value for the quarter and the growth fund fells 7.5%.

Prospects for the present quarter are better, Mr Wong said – the balanced fund has already risen more than 2% and the growth fund by more than 3% – but the short to medium term prospects are still below par.

AMP Capital has moved its own portfolio gradually away from being overweight in equities since October last year, he said.

“Tepid” is how he describes the outlook for investors in global equities.

A “double dip” global recession is unlikely, says AMP’s head of investment strategy Jason Wong.

“There has only been one of those since World War II and that was induced in 1982 because [US Federal Reserve chairman] Paul Volkner was concerned about inflation.”

The question more is how strong the recovery will be, and Mr Wong’s answer to that is “not very.”

“We know the next year or two is going to be quite tough for the global economy,” he said.

This is as economies adjust to the aftermath of the global financial crisis and governments start to pay back some of the massive debt they have taken on since 2007.

AMP’s head of fixed investment, Grant Hassall, says the world is going through a historical first and it is difficult to predict how it will play out.

There have been similar large rises in debt in the past, which have had to be paid back by a prolonged period of austerity.

“But those debt hangovers have been after a war and people have accepted what needed to be done.

“This is the first time it is because of the financial system and we don’t know how people are going to behave.”

Rob Hosking
Wed, 28 Jul 2010
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Tepid outlook for global investors - AMP
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