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Equities could deliver returns in the region of 8% and be the best asset class during 2012 to 2016, according to forecasts by Robeco, the Dutch fund management company.

Emerging market, value and momentum stocks could each deliver 8%, while frontier market equities could see returns as high as 8.25%, the firm said in a report out last week that looks at equities, bonds and alternatives. Low volatility stocks and developed market equities are expected to return 7%.

Equity returns will be below the long-term average and emerging markets – with a volatility of 25% - will be relatively the most attractive to hold.

Volatility for equities ranges from 13% for low volatility stocks to 28% for frontier markets. Most are in the 20% to 25% volatility range.

Hedge funds, meanwhile, are forecast to return 4.75% with a volatility of 10%. Other alternative asset classes in the report include: private equity (7% with 25% volatility) and commodities (4.75% with 25% volatility). Indirect and direct real estate are predicted to return 6% and 5% respectively.

The report (Robeco’s Expected Returns, 2012-2016) is aimed at long-term investors and gives forecasts for expected returns from current economic circumstances over a longer period of time. For example, momentum and value stocks are each predicted to return 9% - the highest among equities - with other equity classes returning between 8% and 8.75%.

The firm acknowledges that there is much uncertainty in these forecasts. Robeco reached its conclusions by first estimating the long-term equilibrium returns expected regardless of the current economic environment, and combined these returns with the macro-economic environment and valuations.

Robeco also feels that inflation-linked bonds, commodities, and commodity-related equities are the best hedges against shocks in inflation.

©2012 funds europe

Clearstream's project to harmonise the world's post-trade infrastructure is close to signing a deal with Singapore, its first Asian partner, Funds Europe has learned.

Singapore's central securities depository (CSD) will be the eleventh member of the Link Up Markets project, which was founded in 2008 to tie together European CSDs. It will follow South Africa and Egypt, the two other non-European countries to have joined so far.

Clearstream, the clearing and settlement division of Deutsche Börse, has yet to announce the news, but Irene Mermigidis, managing director of Link Up Markets, did explain that the benefits for non-European members were access to 50% of the European market and the potential to become a gateway into Europe for their own region.

New members could also learn from the experience of existing members and evolve to the same standard as European CSDs.

The Singapore deal may intensify the country's rivalry with Hong Kong to be a financial entry point to Asia. Hong Kong also has a pilot project to improve links between CSDs, but it is working with Clearstream's rival, Euroclear. A task force led by Hong Kong and Malaysia is trying to create a common post-trade environment for bonds in Asia, with Euroclear's assistance.

It is unclear whether there will be any more new members for Link Up Markets in the near future. Mermigidis said her priority is not to recruit new CSDs but to prepare the original European members for Target2-Securities, an IT platform that will consolidate settlement of bonds and equities in Europe and go live in 2015.

Mermigidis accepted that many non-European CSDs were waiting to see how things go in Europe before making decisions about getting involved in these kind of cross-border projects.

“Of course, having new members is important but the existing members that have already invested in Link Up Markets did that for a purpose and that was to help them in view of the Target2-Securities challenge,” she said.

©2012 funds europe

Net retail sales of funds in the UK dropped by more than a third in 2011 to £18 billion (€22 billion), while funds under management declined 3% to £571 billion, according to the Investment Management Association (IMA). But despite the falls, net retail sales still beat the average of £13.8 billion from the past ten years.

Richard Saunders, chief executive of the IMA, described 2011 as “a year of two halves”. Net sales in the first six months were nearly £14 billion, in line with the previous year, but fell away in the second half.

Funds which split their investment between equities and bonds, balanced funds, gained £5.6 billion of new money. Bond funds gained £4.5 billion and equity funds £3 billion.

“The first six months saw a continuation of the very strong sales of 2009 and 2010, but investors turned much more cautious in the second half of the year, perhaps unsettled by the eurozone crisis,” said Saunders.

©2012 funds europe