There is growing concern about government regulation among fund managers globally, a recent survey by Towers Watson has revealed. According to the annual Global Survey on Investment and Economic Expectations, fielded in November to December last year, more than half the investment managers surveyed see government intervention as the most relevant issue over the next five years, saying it will impact their investment performance.

“What’s worrying the most is basically government intervention – what are governments going to do that will change the investment landscape? So that’s the monetary, the fiscal, the legislative and regulatory,” says Martin Goss, senior investment consultant at Towers Watson.

Goss says almost half the managers are also worried about global economic imbalances and, in the long term, bonds and cash rates.

“Investors overseas have cash rates that are truly appalling. They’re under inflation, so that they’re not getting a real return. Australia actually stands out as a place where cash isn’t quite as much of a negative asset as it is overseas.”

Respondents also showed an overwhelming lack of confidence in bonds.

“One-third is strongly bearish and, in total, 80 per cent are either strongly or moderately bearish,” says Goss. “And you compare that to when you look at cash… around 50 per cent are bearish in total, so you can see the big gap there.”

Sovereign debt default also remains a concern, but there’s been “a reasonable drop” in the level of concern, from 46 per cent to 33 per cent.

“[This] does show confidence, but it’s still the third most worrying issue, so it’s still up there,” says Goss.

Belief remains that there will be a default, but the perception is that Europe is no longer on a precipice, according to Goss.

“I think it’s more the fact of worrying about how bad the default will be and how much it will impact global markets. It will contribute less and be less painful than was the fear last year.”

There were no fresh concerns or striking differences between the last two surveys, he says. Managers had better expectations for equity returns for 2013 than they did for 2012 in most markets, except for the US and Australia.

“Their expectations for equity returns in the US and Australia are at the lowest since we started the survey in 2008. That’s just a feeling that those markets have probably rebounded better, the economies have had their improvements that’s been priced in the markets, and just not seeing as much upside going forward.”

Meanwhile, Goss says sovereign debt wasn’t on the radar from 2008 to 2010, but it became a major issue in 2011. Inflation is also less of a worry for respondents.

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