FINANCE NEWS: Corporate bonds to outstrip gilts, says Schroders outlook

Corporate bonds will be the most attractive asset class during 2003, producing returns of up to 20 per cent while government bonds will produce returns of zero, according to investment manager Schroders.

The company is also optimistic about the prospects for equities, which have been battered in the past two years. "Equities will produce returns more closely in line with corporate bonds rather than government bonds," said chief investment officer Mark Pignatelli.

The performance of hedge funds was strong compared to equities this year but disappointing in the light of the historical returns of hedge funds, said Schroders. It is predicting returns of 6 to 9 per cent for hedge funds during 2003.

Property will continue to be an attractive investment because of low inflation and interest rates. Institutional investors, such as charities, will continue to allocate part of their portfolio to property which will maintain capital values.

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