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The report, commissioned by Citi's Global Transaction Services and Principal Global Investors, canvassed more than 220 fund managers from 30 different countries.

It concluded that retail clients, having been severely burned last year, were now likely to display strong behavioural changes than other segments.

The survey found that the more mainstream asset classes would be in the ascendancy in the coming months, with retail clients being drawn increasingly into products offering capital protection and tax efficiency.

High net worth clients will remain in the active long-only funds with periodic forays into alternatives, Create-Research said.

Fifty-five per cent of fund managers questioned said they expected retail clients to opt for products that offered capital protection and tax efficiency, as well as annuities.

More sophisticated investors will be likely to venture into absolute returns products and index funds, with "periodic bouts of opportunism" that will rotate between alpha funds and cash-plus products, Create-Research said.

It said that while the demand for absolute returns products would remain strong, particularly in the UK and the US, its supply would be under "intense scrutiny" due to the "shock waves from the Madoff debacle".

It said this emphasis on capital protection was "understandable" in the wake of recent losses and that retail clients more than ever were taking on board the mantra "do not buy what you don't understand".

Despite exceptional uncertainty about the future, the survey's respondents were definite about one thing: 70 per cent expected their industry to become more polarised, with large players emerging to dominate either assembly or manufacturing.

This domination will play out as one of three scenarios, respondents predicted.

At one extreme is the 'commoditisation' scenario. Thirty-four per cent of respondents expected their industry to "dumb down", were more regulation and lawsuits would tilt the balance in favour of low returns, low volatility, high transparency, high liquidity and low fees.

Under this scenario, there will be a "talent drain", Create-Research said, where competition will intensify and scale players will be the winners.

At the other extreme is the 'vibrant industry' scenario. Seventeen per cent of respondents expected asset managers to "rise proactively" to the challenges thrown up by two bear markets this decade and put clients at the "heart of their businesses".

According to Create-Research, this means "selling products clients need rather than what they have" and delivering innovations that add value, rather than creating "copycats".

In between the two extremes is the 'segmented industry' scenario. Forty-nine per cent of those questioned expected significant acceleration of some of the existing trends, giving rise to a number of complementary possibilities.