Professor Paul Marsh, emeritus professor at London Business School, told the National Association of Pension Funds investment conference that he expected global equities to return "a little over 3%" over the next 30 years, while the return from bonds would be "marginally positive", and from cash they would be negative.
He said past surveys had assumed the US experience of the last century was "normal", adding: "Since 1950 baby-boomers have enjoyed very high equity returns of the order of 6.7%, wonderful returns, and their children, the generation born from 1980 onwards, have seen bond returns incredibly high, close to 6%."
"Even cash had made a real return of 2.7% since 1980."
However, Professor Marsh, whose LBS research covers global markets over 113 years, said lower real interest rates meant lower real equity returns.
He warned fund managers: "This is not a prediction for the rest of this year or the next five years but the next 30 years, but as an industry you should not be in denial nor should you bank on equities to bail you out."
NAPF investment council chairman Martin Mannion, opening the conference for 900 delegates representing 1300 pension schemes and £900 billion of assets, said the early signs of automatic enrolment into pensions at work were "massively encouraging", with opt-out rates of only 10%.
He said the biggest firms would soon be six months into auto-enrolment, but admitted: "The true test will come in a year's time when small employers hit their staging dates."
He said if there was a continuation of present trends of pension fund shrinkage, and the shift from equities into bonds, £24bn would be drained from UK equities by 2015 and £35bn by 2025. "The change in the way pension schemes invest has a massive effect on the real economy – schemes are providers of equity capital and growth in the economy." The rise of defined contribution schemes would fill only part of the gap.
Mr Mannion said the NAPF had written to the chairmen of the FTSE-350 companies, urging them to ensure "a more robust link between performance and executive pay".
He said the association believed that benchmarking top rewards against peer group companies "simply has the effect of ratcheting up pay".