Schroders Global Investor Study 2023: Investors in Singapore forced to reconsider their investment strategies amid inflation and geopolitical uncertainties
Investors in Singapore have been forced to re-evaluate their investment strategies in response to the new economic reality and ongoing inflation and geopolitical uncertainty, Schroders Global Investor Study 2023 has found.
Schroders’ flagship study, which has surveyed over 23,000 people who invest from 33 locations globally, including Indonesia, Malaysia, Singapore and Thailand in Southeast Asia (SEA), has identified that almost 74% of Singaporean investors (versus 78% globally and 79% in SEA) now believe that we have entered a new era of policy and market behaviour as a result of higher inflation and interest rates.
This is in stark contrast to last year’s study when 42% of respondents believed the market challenges to be a blip and predicted a quick return to the more benign, low inflation, low rates environment. As a result, half of Singapore investors (versus 54% globally and 59% in SEA) have already adjusted their investment strategies, and a third intend to do so.
Our research shows Singapore investors who rated their investment knowledge as ‘expert’ were the quickest to react, with 85% (versus 77% globally and 84% in SEA) having already adapted their strategy, while 41% (versus 39% globally and 55% in SEA) who rated their investment knowledge as ‘beginner’- have yet to do so.
Our study also highlights that 43% of Singapore investors are increasingly seeing government bonds more attractive, followed by cash (42%), digital (35%) and private assets (35%).
The vast majority of Singapore investors, however, remain optimistic, with 83% (versus 87% globally and 90% in SEA) expecting returns to be either identical to or higher than last year.
This was particularly the case amongst ‘expert’ investors in Singapore, with only 2% (versus 4% globally and 3% in SEA) expecting next year’s returns to be lower.
Strikingly, majority of Singapore investors expected annual returns of 9.65%, less than the global average of 11.5%. This is on par with the 9.46% annualised return of the MSCI World Index of global stocks between 1987 and September 2023.
Johanna Kyrklund, Schroders’ Group CIO and Co-Head of Investment, said:
“In an investment landscape being increasingly shaped by the ‘3Ds’ of deglobalisation, decarbonisation and demographics, investors are still getting used to the fact that higher inflation and higher interest rates are here to stay. Every asset has had to reprice to compete with a yield on cash in the bank. Valuation matters once again. Compared to the last 15 years, you may now need to be more flexible and active in the way you invest. The results of the study show that some investors are adjusting quicker than others.”
Private assets as a hedge in a rocky economic environment
In recent years, regulators and asset managers have actively been working on democratising private assets. However, 60% of Singapore investors (versus 64% globally and 62% in SEA) still have limited knowledge of the asset class, indicating greater education is required to support the continued growth of these investments.
Furthermore, 62% of investors in Singapore also highlighted that costs and expenses associated with private assets are acting as a barrier to investment.
Nevertheless, on average, Singapore investors admitted they would consider allocating 13.5% of their funds into private assets (versus 16.4% globally and 15.7% in SEA). For ‘expert’ investors, this rose to 20.82% (versus 23.1% globally and 21.9% in SEA).
Specifically, 25% of Singapore investors are most attracted to investing in real estate, closely followed by private equity (24%) and infrastructure and renewable energy (22%). Again for ‘expert’ investors, this rose slightly to 30% saying they most want to invest in real estate.
Overall, Singapore respondents view private assets as an important diversification tool (51%) and a way to boost portfolio performance (49%). Interestingly, close to a third (31%) of investors in Singapore are also attracted by the perceived sustainability credentials of private assets.
Nils Rode, Schroders Capital’s Chief Investment Officer, said:
“A few years ago, a typical private assets investor would have been what asset managers call “institutional”. These are big investors like defined benefit pension schemes or large endowment funds. As this year’s GIS shows, the picture is likely to change a lot in the next few years.
“The range of options to access private markets is widening, and smaller investors are taking note. It’s a challenging time to be interpreting markets, and investors are looking for every available tool to achieve their desired outcomes. Private assets represent an incredibly varied set of opportunities and a huge number of return drivers.
“We believe the widening of options for smaller investors is a very positive development. We also believe that the case for including a private asset allocation – where appropriate - is arguably stronger than ever.”
Sustainable investment: time to engage
Singapore investors are attracted to investing sustainably because of the potential to generate positive environmental impact (55% versus 55% globally and 53% in SEA) and align investments to their societal principles (27% versus 42% globally and 51% in SEA).
A key element of sustainable investing is active ownership - engaging with companies directly to improve business outcomes with the ultimate aim of supporting investment returns.
Specifically, the key topics on which investors want to see active engagement are with regards to climate (31%), natural capital (23%) and the treatment of workers (20%).
Andy Howard, Schroders’ Global Head of Sustainable Investment, said:
“This year’s results underline the widespread and growing recognition of the importance of active ownership to sustainable investment. Companies across industries face a wide range of challenges and opportunities, and intensifying pressures to adapt and evolve. As active managers with a long-term and fundamental focus, using our voice and influence to encourage companies to build healthier, more sustainable business models has long been important and is becoming more so as those trends intensify.”
For more information about the Global Investor Study and to view the full report, findings and charts in more detail, please click here.
For further information, please contact:
Hilary Espinosa Penta Asia | Tel: +65 9423 5851 |
Clarence Chen Schroder Investment Management (Singapore) Ltd | Tel: +65 6800 7397 Email: clarence.chen@schroders.com |
Note to Editors
Between 26 May and 31 July 2023, Schroders commissioned an independent online survey of over 23,000 people who invest from 33 locations around the globe. This spanned countries across Europe, Asia, the Americas and more. This research defines people as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last 10 years. Due to this threshold, Schroders acknowledges that this group and therefore the research findings are not representative of everyone’s experience.
Note: Figures in this document may not add up to 100 per cent due to rounding and multi-select options.
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Important information
This is prepared by Schroders for information and general circulation only, and the opinions expressed are subject to change without notice. It does not constitute an offer or solicitation to deal in units of any Schroders fund and does not have regard to the specific investment objectives, financial situation or particular needs of any specific person who may receive this. This article has not been reviewed by the Monetary Authority of Singapore.