Big disconnect between investor risk and return expectations – Schroders

According to the firm’s Global Investment Trends survey which polled 20,706 investors across 28 countries in March, the average expected rate of return expected over the next 12 months is 12%. UK investors on average expect a rate of return of 8%, with 87% banking on their investments growing over the period.
However, while investors are confident of their expected returns, only 14% of UK investor money is destined for higher risk/ higher return assets, Schroders said.
“Over half (53%) of investors’ funds going to low risk / low return assets and a third (33%) being placed in medium risk assets, such as bonds,” the firm said.
This is more cautious than the global average, with 21% of investors’ funds globally destined for higher risk assets.
This discrepancy between risk and return expectations by the level of valuations across most asset classes, which look fairly stretched, and recent significant moves in sovereign bond markets underlining just how quickly markets can move.
The other major finding is that 34% of investors globally and 40% of UK investors intend to invest as they have done in previous years, with only around a fifth planning to seek out financial advice in order to change their strategy.
“The data shows a bias towards short-term investing, with 46% of global investors preferring outcomes within one to two years and only 12% preferring a long-term approach,” the group said.
James Rainbow, head of financial institutions and strategic accounts at Schroders said: “Many investors are taking an unrealistic view on how their assets will perform in a market that is still dogged by the worst recession for a generation, and a de-synchronised monetary policy. Investors need to balance both risk and return very carefully when making their decisions rather than just focusing on either risk or potential return – they are always linked.