Pimco, the manager of the world's largest bond fund, said on Tuesday in its three-to-five-year outlook titled "The New Neutral" that low central bank interest rates underscore an end to bull markets in financial assets.

In the report released on the firm's website, Pimco said that neutral real, or inflation-adjusted, central bank policy interest rates close to zero suggest "an end to bull markets as we've known them, but no perceptible growling from the bears."

Pimco said that the firm saw perhaps 3 percent returns for bonds and 5 percent returns for stocks over the next three to five years.

In global monetary policy parlance, a neutral central bank interest rate does not spur or slow economic growth, with all other factors being equal. In financial terms, it refers to a market that displays neither bullish nor bearish tendencies.

Pimco, whose flagship Pimco Total Return Fund has $230 billion in assets and is run by co-founder and chief investment officer Bill Gross, said that markets had incorrectly assumed that central banks could set higher policy interest rates.

Gross has said that while current Federal Reserve participants believe the neutral rate is 4 percent, Pimco believes 2 percent is "closer to the mark."

Gross added that if the neutral rate is 2 percent, asset markets are "not bubbly, just low returning."

In Tuesday's report, Pimco said that implications are for "low returns yet less downside risk that investors currently expect," and that it expects 10-year Treasurys yields to be range-bound between 2.5 to 4 percent over the next three to five years.

One factor weighing on the potential in equity markets would be that Shiller price to earnings ratios are above historical norms. The "Shiller P/E" was named after Yale University economics professor and Nobel laureate Robert Shiller.

Pimco assured investors, however, that it could still deliver higher returns over the next half-decade despite modest growth and low upside on assets.

"A sow's ear can be turned into a silk purse even if 10-year Treasuries are range-bound between 2.5 percent and 4 percent as we expect over our secular horizon," the report said.

In economic terms, a secular trend is a market tendency that is sustained over the long term. The term is most often used to distinguish those tendencies from seasonal variations and the effects of economic cycles.

The "New Neutral" title of the report marked a shift away from the firm's "New Normal" phrase, which it coined five years ago to describe a period of global economic stabilization following the 2008 financial crisis.

Pimco said that, despite the promises of an energy revolution for the U.S. economy, there was a risk that the U.S. and the broader global economy would be unable to grow and generate inflation at levels that preceded the 2008 financial crisis "for many years to come."

The company also said that large sovereign debt in many euro zone countries would probably lead European Central Bank policymakers to keep interest rates lower for longer and added to the odds of a "major quantitative easing program."

The company said that eurozone growth rates would likely not exceed 1.25 percent on average over the next three to five years and that the region was "not really healthy."

With regard to China, it said monetary policy in the country must remain accommodative and that growth would be between 6-6.5 percent.

Pacific Investment Management Co, a unit of European financial services company Allianz SE, had $1.94 trillion in assets as of March 31, according to the firm's website.