LUXEMBOURG Investors should not expect a substantial bull run for the next three years, the head of an industry think-tank said on Tuesday.
Create Research's Chief Executive, Amin Rajan, told the Reuters Funds Summit he believed more speculative investors could spur corrections in financial or technology stocks given their current low prices.
"There will be investment based on corrections, on opportunism. Joe Public will only come into the market when he sees, say, industrial production in Japan is not dropping like a stone," Rajan said.
Rajan argues the market will be split between a small group of speculative investors with about $5 trillion of assets and willing to pick up seemingly distressed assets.
A more risk-averse public and institutions such as pension funds, with about $45 trillion of assets, would want some sort of downside protection and would accept lower returns.
"Our forecasts are predicated on idea that markets will recover but not get into a raging bull market over the next three years," said Rajan.
In a new, more cautious environment, the bulk of investors would interested in the risk profile of a given fund, rather than simply want to pile money into a given asset class, such as equities or bonds.
Fund products were likely to reflect this, Rajan said.
The fund industry has also faced calls to increase transparency, which has so far concentrated on clarity for retail investors.
Rajan said institutional investors, such as pension funds, would also demand greater transparency.
"I think we will see that on the institutional side ... There are big boys with professional advisers and they have lost a heck of a lot of money," Rajan said, adding that total pension assets worldwide were about $18 trillion and had lost about a quarter of that in the past 18 months. (For the Hedge Hub blog: blogs.reuters.com/hedgehub) (For Global Investing: here) (Reporting by Philip Blenkinsop; Editing by Andrew Macdonald)