SMS - Strategies Day 2016
SMS - Strategies Day 2016

Research signals change in investor appetites

21-Apr-2015

By Julie May

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Investors were showing a stronger appetite for growth, with many looking overseas for new investment opportunities, data from Investment Trends revealed this week.

The group’s “2014 Investor Product Needs Report” showed over the past five years there had been an increasing proportion of investors who prioritised income as their primary investment goal.

In 2014, that number fell for the first time since the group started conducting the study, with 33 per cent of Australian investors prioritising income as their primary investment goal, down three percentage points from the year prior.

"For a number of years, particularly between 2012 and 2013, we had been seeing investors becoming increasingly focused on income-focused investments," Investment Trends analyst King Loong Choi said, adding in 2014, more investors were starting to prioritise growth-oriented investments.

"The increased appetite for growth has been driven by investors' concern with the world's financial markets gradually declining over the last 18 months.”

He said investors' outlook for the Australian stock market also remained quite low, with investors' capital return expectations for domestic equities falling from 6 per cent a year in January 2014 to 2 per cent a year in December 2014.

Choi said the difficulty in identifying investment opportunities in the domestic market was fuelling the appetite for more overseas exposure.

Meanwhile, other findings from the report showed managed funds continued to account for a small proportion of portfolios, with the average investor allocating only 8 per cent to managed funds.

Looking forward, interest in managed funds, however, had picked up, with 46 per cent of investors saying they were open to considering an unlisted managed fund investment, including 7 per cent who intended to make a managed fund investment in the next 12 months, Choi said.

"Investors' interest in managed funds started to return in 2014, partly driven by their growing desire for greater diversification – both domestic and international – in their portfolios," he said, adding younger investors were typically more open to investing in managed funds than older investors.

The report also showed there was currently an opportunity for the capital-protected products market, given the current environment of record low interest rates and rising asset prices, coupled with increased uncertainty.

"As more investors look to chase growth opportunities in the coming year, fear of market reversals could drive demand for products offering market protection," Choi said.

The number of capital-protected product investors stabilised at 29,000 in 2014, after falling 46 per cent between 2009 and 2013.

Looking forward, there was growing interest in those products, with 32,000 investors saying they intended to invest in them in the next 12 months, up from 22,000 in 2013.

The Investment Trends report was based on a study of 10,645 Australian investors.

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