Schroders Global Investor Study

Schroders conducted an independent online study of 20,000 investors in 28 geographies around the world for the third year in a row. This year, Schroders studied the investment behaviours of millennial investors for the first time, who have a strong consumption potential.

The 2016 Schroders Global Investor Study revealed a worrying trend amongst Hong Kong and global investors who have unrealistically high income expectations and a short-term investment approach. Schroders aims to help investors better understand their own investment behaviour and meet their investment goals through the incomeIQ quiz.

 

Who we surveyed


20,000
investors

each with

€10,000+
of investable assets

across

28
countries
about investment goals,

attitudes and behaviours

 


 

Demand for income


Average income expected by investors

9.1%

v.s.

Average
stockmarket yield(i) 

3.8%

Investors aiming for 10+% yield


Millennials (aged 18-35)

v.s.

Investors aged 36+

 

The top reasons for investing

Supplement pension



Re-invest income and grow portfolio

Supplement income

 

Millennial investors have a higher income demand, but do all investors have unrealistic expectations?

 


 

Funding in retirement

Globally, investors acknowledge the need to diversify their sources of retirement income

Investors recognise the need to diversify their sources of income, but are they too reliant on the state?  

 


 

Short-term investment approach

On average investors stay
invested for
3.2 years
8% millennials stay invested for 5+ years

Asset managers generally recommend
holding investments for
5+years
24% investors aged 36+ stay invested for 5+ years
Investors demand high levels of income, but does their short-term outlook compromise their investment goals?

  
Over-confidence


  
Thirst for knowledge


How and where can they learn more

How do investors want to improve their understanding of investment?

 

50% investors would still like guidance from a financial adviser next time they make an investment decision, despite overconfidence and a willingness to learn.

 


 

Investing with a Conscience - Environmental, Social & Governance (ESG)

On average, investors were willing to give responsible investments with positive ESG factors more time to succeed: 

More investors would consider moving out of a company if it was not considering ESG factors even if the investment had performed well


Top reasons to move out of investments:*

For more information, check out the Global Investor Study insight section.

 


(i)Source: FTSE, S&P 500, CAC, DAX, Shanghai, Nikkei, ASX, Hang Seng, Bovespa, Mexbol. Average forward 12-month yield across 11 indexes as at 18 May, 2016, according to Bloomberg data.
*% of global investors that would either consider or definitely move their investment

Who we surveyed


500
investors

each with

HK$86,000+
of investable assets
about investment goals,

attitudes and behaviours

 


 

Demand for income

Average income
expected by investors

8.9%

v.s.

Average
stockmarket yield(i) 

3.8%

Investors aiming for 10+% yield

Millennials(aged 18-35)

v.s.

Investors aged 36+

 

The top reasons for investing


Supplement income


Supplement pension


Re-invest income and grow portfolio

 

 

 

Funding in retirement

Investors acknowledge the need to diversify their sources of retirement income

 


 

Short-term investment approach

On average investors
stay invested for
3.4 years
11% millennials stay invested for 5+ years

Asset managers generally recommend
holding investments for
5+years
29% Investors aged 36+ stay invested for 5+ years

 


 

Investors are quite confident in themselves

 


 

Thirst for knowledge


 

How and where can they learn more?

 

How do investors want to improve their understanding of investments?

 

45% Hong Kong investors would still like guidance from a financial adviser next time they make an investment decision, despite confidence in themselves and a willingness to learn.

 


 

Investing with a Conscience - Environmental, Social & Governance (ESG)

On average, investors were willing to give responsible investments with positive ESG factors more time to succeed:

More investors would consider moving out of a company if it was not considering ESG factors even if the investment had performed well

Top reasons to move out of investments:*

 

For more information, check out the Global Investor Study insight section.

 


(i) Source: FTSE, S&P 500, CAC, DAX, Shanghai, Nikkei, ASX, Hang Seng, Bovespa, Mexbol. Average forward 12-month yield across 11 indexes as at 18 May, 2016, according to Bloomberg data.
 *% of global Hong Kong investors that would either consider or definitely move their investment

 

Depressed wages, escalating living costs and a struggling global economy – millennials have a lot on their plates. They need investment income to support short and long-term financial aspirations. Are investors facing a perfect investment storm?

Millennial investors facing a perfect storm

Characteristics of millennial

The result could see millennials fall drastically short of their investment goals.

Schroders Global Investor Study revealed: 

    • Hong Kong millennials have an extremely short-term investment outlook, with 58% holding investments for less than 2 years
    • Hong Kong millennials are risk averse, prioritising capital preservation and a return higher than inflation when choosing an investment
    • Hong Kong millennials’ income is being stretched across a wide spectrum of dependencies from supplementing salary and pension to supporting children and buying houses

 

Is a financial storm brewing?

It is a potentially toxic mix. We live in a world where most developed nations’ interest rates are at or below 0.5%, and, in some cases, heading lower. The average stockmarket yield is just 3.8%(i).

To get the higher income they demand millennials would either need to take more risk or hold investments for a longer period in order to ride out market cycles, neither of which they seem willing to do.

The major risk is that millennials are labouring under two misapprehensions:

Compounded over a 20 or 30-year time frame, the gap is potentially huge, making the mismatches between expectation and reality identified by the 2016 Schroders Global Investor Study a cause for real concern.

Stretching incomes to the limit

To make matters, worse millennials have a far greater number of dependencies than older generations over which their income is being stretched.

Schroders Global Investor Study found the main reasons millennials invested were:

Yet, according to a recent Guardian newspaper study, “a combination of debt, joblessness, globalisation, demographics and rising house prices is depressing (millennials) incomes”. (ii) 

Investors are quite confident in themselves

Hong Kong investors’ self-belief is quite high, with 46% describing themselves as having more understanding of investments than average.

This confidence is highlighted among millennials, with 51% of them agreeing to the statement, compared to 41% by their older counterparts.

The chasm that has opened up between millennials’ investment goals, their unrealistic income expectations and short-termism and over-confidence needs to be addressed, otherwise we could be heading for another social and economic crisis.

Signal for help

Reassuringly, millennials are willing to improve their investment knowledge, 94% of Hong Kong millennials would like to improve their investment knowledge.

38% of millennial investors said they would like to improve their understanding of investments by speaking to a financial adviser, compared with 49% for investors aged 36 and over. Compared to millennials, their older counterparts are more willing to take personal advices from an investment professional.

 

For more information, check out the Global Investor Study insight section.


(i) Source: FTSE, S&P 500, CAC, DAX, Shanghai, Nikkei, ASX, Hang Seng, Bovespa, Mexbol. Average forward 12-month yield across 11 indexes as at 18 May, 2016, according to Bloomberg data.

(ii) http://www.theguardian.com/world/2016/mar/07/revealed-30-year-economic-betrayal-dragging-down-generation-y-income

 

Schroders incomeIQ Test

Nobody knows quite what the future holds. Changing life plans and priorities will mean you encounter varying income needs and goals throughout your life and when investing, certain innate behavioural traits will influence your decision-making.

Schroders incomeIQ is a knowledge centre with guides, tips and tools to help you understand these issues and make more informed investment decisions to meet your income needs effectively. We have developed the incomeIQ test which will reveal your behavioural biases and provide useful tips to empower you to make better investment decisions. Become an empowered investor today with Schroders incomeIQ.

 

 

 

For more information, check out the Global Investor Study insight section.