Schroders Global Investor Survey 2022: Inflation now the key driver of UK investor behaviour amid economic uncertainty
Schroders Global Investor Survey 2022: Inflation now the key driver of UK investor behaviour amid economic uncertainty
The majority of UK investors have changed their investment strategy amid rising inflation and growing economic uncertainty, Schroders Global Investor Study 2022 has found.
Schroders’ flagship study, which has surveyed more than 23,000 people who invest from 33 locations globally, found that more than two-thirds (67%) of UK investors have made changes to their portfolios compared with 55% of investors globally.
A further 22% of investors in the UK intend to make future changes to their investment strategy. Globally, this rises to almost a third, suggesting that investors worldwide are also reacting to the impact of inflation.
In addition, the research also revealed a shift among UK investors away from long-term investment strategies, with two-thirds willing to prioritise short-term gain compared with 54% of global investors. Furthermore, three-quarters of investors in the UK feel forced to take more risk than they would like, indicating how the economic environment is likely to be impacting their confidence.
In light of this more challenging outlook, 39% of UK investors are increasing diversification within their portfolio, while two-thirds (68%) believe their investments are already diversified enough to mitigate against the impact of a significant market event compared with 60% globally.
Meanwhile, over half of UK respondents (54%) stated that they now found actively-managed funds more attractive, 6 percentage points higher than the global average. Moreover, 41% of UK investors said that they are now more likely to speak with a financial adviser, another indicator of the increased demand and importance of expertise in tougher times.
Interestingly, despite evidence of increased investor anxiety, UK investors are still anticipating annual returns over the next five years of 11.26%, up slightly from 10.78% in 2021. This is a 0.48% percentage point rise compared to the global increase of only 0.06% percentage points. Expectations across Europe were widely revealed to be lower than the UK, with France expecting returns of 9.20% and Italy 9.80% over the same period. Only Sweden and Greece expected marginally better results at 11.45% and 11.39% respectively. Worldwide, Japan was found to anticipate the lowest returns at 8.19%.
The average growth rate of investors’ return expectations globally since 2017 has been 0.23 percentage points, markedly higher than this year’s 0.06 percentage point increase, evidencing that as inflation and interest rates have started to rise, people’s return expectations are now growing at a slower rate than previously been the case.
Doug Abbott, Head of UK Intermediary, Schroders, said:
“The results of the study are an important insight into how the wider economic environment can have a direct impact on investor behaviour and psychology when it comes to making investment decisions. It is encouraging however to see that investors recognise the value active management can provide in times of uncertainty.
“We believe understanding investors’ concerns and goals are crucial factors and are committed to providing a range of products and solutions to help guide people through a variety of economic backdrops. It is through this client-centric approach that we aim to help them navigate this increasingly challenging period."
Lesley-Ann Morgan, Head of Multi-Asset Strategy at Schroders, said:
“These are unusual times with inflation in many countries now at its highest level for several decades. There is a danger that investors’ optimism about future returns is based on their experience of recent years, where inflation was in check and the cost of borrowing at record lows. We’re now moving into a new and arguably far more challenging phase.
“For some people, the phenomenon of rising rates and inflation is greatly disconcerting with the results of the Global Investor Study indicating that people of all types of investment experience are keen to seek the advice of experts to help them navigate these challenges.
“Indeed, it is times like these when the expertise and experience of active managers becomes increasingly crucial as investors look to control their investment risk and also diversify. Amid this challenging environment, the study also found that more than half of investors (58%) agree that the performance of their investments has a direct impact on their mental health, further emphasising the critical role active managers and financial advisers have in supporting them.”