Investors eye safer funds, firms must adjust-survey

* Fund firms face lower profits again

* Investors clamor for safer portfolios

* ETFs, index funds likely more popular than stock funds

By Svea Herbst-Bayliss

BOSTON, July 6 (Reuters) - Money managers must offer new portfolios and keep cutting costs to survive in an era where frightened investors prefer safer fixed-income funds to stock and hedge funds, a report released on Monday showed.

Badly bruised by last year's financial crisis when tumbling markets and investor redemptions shrank global assets 18 percent to $48.6 trillion, asset managers face more tough times in 2009 and the years ahead, The Boston Consulting Group wrote in its seventh annual asset management industry survey.

Profits will shrivel again, likely falling to 30 percent or less this year from 34 percent at the end of 2008 and 38 percent at the end of 2007, the consultants forecast.

Even though the Dow Jones industrial average .DJI just finished its best quarter since the fourth quarter of 2003, BCG consultants warned firms against becoming too confident or thinking the worst is over.