Schroders Global Investor Study 2020: Bullish UK investors still targeting investment returns above 11% despite Covid-19 shock

British investors are optimistically expecting average annual total returns in excess of 11% over the next five years, despite the uncertainty caused by Covid-19, Schroders Global Investor Study 2020* has found.

Average annual return expectations over the next five years have edged up to 10.9% for investors globally, with investors in the Americas expecting performance of 13.2%, according to the study which has encompassed more than 23,000 investors from 32 locations globally.

In contrast, European investors are expecting returns of 9.4% on average over the next five years.

British investors have however lowered their income expectations, with 8.6% expected to be achieved over the coming 12 months, compared with 10.3% a year ago.

Perhaps reflecting a more optimistic theme, only 8% of UK investors expected the negative economic impact caused by Covid-19 to reverberate for more than four years. In fact, only 25% expect the ramifications to go on beyond two years.

The impact of the global pandemic nonetheless caused 27% of investors move significant parts of their portfolios to lower-risk investments, with as many as 78% making some changes to their portfolios in February and March 2020 alone. Those who rate their investment knowledge as ‘expert’, or ‘advanced’, were more likely to have done so – accounting for 89%.

A further 24% said they moved some of their portfolio to lower risk investments.

Interestingly, 19% confirmed they took the opportunity to move some of their portfolio to high-risk investments, while 20% said they opted to do nothing and stuck with their investments as they were.   

Furthermore, it was older generations who appeared to remain calm amid the market volatility caused by Covid-19. All (100%) of those aged 71 or older either moved their portfolio but maintained the same level of risk or opted not to make any changes. This compared to just 16% of millennials[1].

Doug Abbott, Head of UK Intermediary, Schroders, commented:

“The UK economy is still in the midst of the financial havoc wrecked by the pandemic that has marked the end of the longest bull run in history. However, from our research, we can see that UK investors are looking beyond the immediate downturn to anticipate the shape of the post-Covid economy.

“In our view the virus is likely to reinforce the trends that were driving activity before the outbreak struck, by challenging the growth path, creating greater pressure on government finances and increasing inequality as technology becomes ever more pervasive.

“Investors will need to be more agile than ever to achieve their financial objectives in the current turbulent market. At Schroders, we have the necessary economic expertise, disciplined process and steadfast commitment to help our clients maintain well-balanced investments over the long term.”

The Covid-19 crisis has also triggered more focus on savings, with almost half (47%) of investors stating they now think about their investments at least once a week, compared with 32% before the pandemic.

A two thirds (62%) of people who describe themselves as having an ‘advanced’ or ‘expert’ level of investment knowledge, state that their level of worry if their investments drop for a short period of time is either low or non-existent, highlighting their greater experience navigating periods of uncertainty.

At the same time, 40% of advanced investors would look to source their financial advice from an independent financial adviser compared with 32% for beginners. Furthermore, 29% of savers who class themselves as beginners are likely to seek financial advice from friends or family, compared with 22% of advanced investors and 25% of experts.

Interestingly, the majority of investors (64%) stated that they themselves should be responsible for ensuring their knowledge of financial matters is sufficient, ahead of financial providers, advisers and schools.

At the same time, 46% of investors said schools should have responsibility for ensuring people’s knowledge on personal financial matters. In reality just 34% of investors said they acquired their financial knowledge from school. The same advice gap existed for governments and regulators.

Furthermore, a striking 28% of investors said the number one priority for their disposable income spending was to invest it in their pension, significantly up on 9% three years ago, emphasising that awareness regarding retirement provision has been on the up.

To find out more about Schroders Global Investor Study 2020 and read the full report, please click here.

 

*In April 2020, Schroders commissioned an independent online survey of over 23,000 people who invest from 32 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.

[1] People aged 18-37