Emerging market equities and debt will be among the key asset classes seeing growth in 2013, according to a survey of fund managers.

Of 120 managers with over £10trn under management polled by consultant Aon Hewitt half expected growth in emerging market equities, with other assets expected to see growth including emerging market debt (cited by 40 per cent of managers), global equities and infrastructure (35 per cent), high yield bonds (20 per cent), and property (15 per cent).

Aon Hewitt’s UK head of liquid alternative strategies Guy Saintfiet said the results reflected investors’ broadening outlook: “As sluggish growth rates continue across Western economies, institutional investors are looking further afield, beyond domestic equities, for positive returns. Despite the relative under-performance of emerging market equities in the first quarter of the year, we understand this trend to be part of a much wider strategy among institutional investors in their quest to outperform long-term liabilities.”

By contrast, allocations to investment grade credit were expected to shrink, with tight credit spreads and low gilt yields seeing bonds out of favour among institutional investors. So, too, were funds of hedge funds, according to the survey.

“The fund of hedge funds business model has been under pressure for a number of years now and as investors seek uncorrelated sources of returns, there is a clear need for more sophisticated approaches to obtaining the best returns,” Saintfiet said. “We have seen increased investor appetite for bespoke portfolio solutions rather than taking the search route via fund of hedge funds.”

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