Fewer Australian investors consider themselves investment ‘experts’ amid current market difficulties, but they are more confident that better days are ahead, according to the latest Schroders Global Investor Study 2023 (GIS).
Nevertheless, the GIS found investors globally have been forced to re-evaluate their investment strategies in response to the new economic reality and ongoing inflation and geopolitical uncertainty.
Against this backdrop, far fewer investors consider themselves as having ‘expert’ or ‘advanced’ knowledge in 2023, with 47 per cent of investors globally (60 per cent in Australia) considering their knowledge as ‘expert’ or ‘advanced’. This compares to 56 per cent of investors globally (70 per cent in Australia) in 2022. Notably, however, Australian investors are more confident in their investment knowledge than their global peers.
The GIS results suggest that navigating investment markets has been a humbling experience for many investors, as returns have fallen. However, investors’ return expectations for the next five years have grown compared to 2022, suggesting there is a degree of optimism for the outlook for the future.
The GIS found the vast majority of investors agree they are witnessing a new regime in policy and market behaviour, and that most have changed, or intend to change, their investment strategy as a consequence.
A number of investment thematics have become more attractive to investors. The most popular is internet and technology investments which are of interest to 57 per cent of investors globally (51 per cent in Australia), while 48 per cent of investors globally and in Australia are more attracted to real estate. Gold, silver and precious metals are more attractive to 43 per cent of investors globally (39 per cent in Australia), while 40 per cent of investors globally (33 per cent in Australia) identify crypto currencies as an area of interest.
The study also highlights the importance of active fund management for many investors, while private assets were recognised as an essential diversifying tool with the democratisation trend continuing to gather pace.
The GIS found most investors believe they can easily access private asset markets, principally through their financial adviser, and are interested in competitive returns and opportunities for diversification. In all, 41 per cent of global investors (39 per cent in Australia) say they are interested in private assets as an investment vehicle.
However, there are also a number of barriers preventing investor access, including illiquidity, transparency issues, and inexperience. In addition, the GIS revealed many investors underestimate the necessary hold times for private asset investments, with 28 per cent of investors globally (22 per cent in Australia) expecting to hold for them for a year or less.
Unsurprisingly, investors are attracted to private asset instruments that they are likely to be more familiar with, such as private equity or real estate. Conversely, they are less attracted to more complex, or opaque, instruments like microfinance or private debt.
As for what investors consider when choosing a private asset investment, the GIS found the reputation of a brand and manager was the most cited consideration.
Ray Macken, head of client group said:
“The Australian investor experience is largely shifting alongside global trends. Recent economic and market volatility has definitely hit the confidence of many investors in Australia, but it’s hardly a unique trend and is something that is clearly being felt right around the globe,” Mr Macken says.
“That more Australian investors are considering private assets as an investment vehicle is interesting, however, there needs to be more and better investor education around the asset class. Many underestimate the holding times required for private assets investing as well as its illiquidity, believing it is one year or less when in fact it takes many years to realise returns on investment.”
"While there are many considerations for investors in private assets, it’s unsurprising that the reputation of a brand and manager of a private asset fund is cited as the most important consideration.”
“What is undeniable is that we are entering a new investment regime when it comes to policy and market behaviour and that most investors have adjusted, or will be looking to adjust, their investment strategy. Investors will continue in search of expert guidance in this new regime as volatility has returned, and therefore so too has the opportunity set for active management. We feel ‘higher for longer’ is a much better environment for stock-pickers and asset allocators.”
About the Schroders Global Investor Study:
The Schroders Global Investor Study 2023 explores the behaviours and attitudes of over 23,950 people (including 1,000 in Australia) in 33 locations around the world, between 26th May and 31st July 2023.
This research defines ‘people’ as those who will invest 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. These individuals represent the views of investors in each location included in the survey.
For much information about the Schroders Global Investor Study and to view the full report and findings in more detail, please click here https://www.schroders.com/en-au/au/adviser/global-investor-study-2023/.
