Investors too optimistic on returns


Investors are too optimistic in their return expectations, according to Schroders, with low interest rates meaning returns as high as they are hoping for, are unlikely to be achieved.
According to the latest Schroder Global Investor Study, which surveyed 25,000 investors in 32 locations, investors in Australia expected to achieve annual investment returns of 10.9%.
This was the second-highest return expectation behind the US which hoped to achieve annual returns of 12.4%.
When this was broken down by generation, Australian millennials expected to achieve 12.9% versus Generation X who wanted to achieve 10.8% and Baby Boomers who wanted to achieve 9.2%.
These high expectations indicate why over half of global investors globally were unimpressed with their returns over the last five years.
The report also found investors were making portfolio changes during volatile periods with 27% of Australians moving a significant proportion of their portfolio to high risk investments during the last three months to 2018, above the global average of 18%.
Some 14% moved their portfolio to low risk investments over the same period.
Graeme Mather, Schroders’ head of distribution, Australia, said: “It is clear that investors still have high return expectations that are not in line with the reality of investment markets. It is also clear that more education is needed to ensure investors don’t change asset allocations, and chase market movements, at precisely the time they should not”.
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.