Investors Bullish on Equities
Investors are most bullish on equities this year according to surveys from Schroders, the UK-based global asset manager, and Towers Watson, the professional services company.
The 2014 Schroders Global Investment Trends Report found that 70% of global investors believe equities will deliver the best returns over the next 12 months. This compares to 18% who intend to invest in bonds and 8% in cash.
The report said this is “unsurprising perhaps given their strong performance towards the end of last year, but equally not without challenges in a still transitioning global economy.”
Massimo Tosato, executive vice chairman at Schroders, said in the report: “This is the first major sentiment study into investor confidence and attitudes this year, and indicates that if 2013 was the year of returning hope, 2014 is set to be the year of returning growth opportunities.”
More than half, 56%, of investors in the Schroders survey are more confident about investment opportunities in 2014 compared to last year with just 11% saying they are less confident than last year.
“We believe 2014 will be the year when many investors have the confidence to return with conviction to the markets and invest for the future,” said Tosato. “Indeed the Schroders Global Investment Trends Report shows that 82% of those polled will either increase the amount they invest, or keep it the same as last year.”
Tosato also warned that uncertainty remains with the Federal Reserve’s withdrawal of quantitative easing and questions of how growth will be sustained in individual countries.
Schroders polled 15,749 investors’ in 23 key global economies who said they change their investments over the next 12 months and have at least €10,000 or local currency equivalent to invest, and so are mass affluent and high-net worth investors.
Investors expect the Asia Pacific region to deliver the strongest growth, although there has been a decrease from 46% identifying the region as top investment hotspot last year to 39% in this year’s survey. In contrast investors favouring the USA have grown from 18% to 31% over the same time period and investors favouring Western Europe grew to 27% from 10% last year.
More than half, 54%, of European and UAE investors are more confident about investment returns in 2014 than they were last year. In contrast only 37% of US investors were more confident about investment opportunities this year. The report said: “This potentially reflects fears over the impact of QE tapering and the fact that 2013 saw resurgent US stock market growth and economic recovery.”
In Europe and UAE 69% of investors want to invest in equities this year, 17% in fixed income markets, 15% in physical property, 13% in gold and 10% in multi-asset funds. In the US 71% of investors are looking to invest in equities, with 56% looking at US stocks, and 13% in fixed income.
Towers Watson’s 2014 Global Survey of Investment and Economic Expectations backed up Schroders results as it found that managers are bearish about developed market government bonds and investment grade bonds, even with expectations that interest rates will not move much over the next year.
The report said: “Despite low growth and high unemployment projections across many major economies, managers are bullish about public equities, emerging market equities and private equity.”
The Towers Watson survey found that the US is deemed to be the most rewarding 2014 investment opportunities for equities, currency and real estate. In fixed income, Latin America is thought to be the most rewarding region and managers are bearish on the economic and investment prospects for the Eurozone relative to the US and China.
Less than half, 44%, of the respondents believe that the investment strategies of their institutional clients will become more aggressive.
The report said: “We found it noteworthy that a large number of respondents felt that the most important attribute of future investment success is added value through active management. While we agree that active managers can add significant value, especially in an environment where valuations are heavily impacted by government actions, Towers Watson believes the appropriate response to an uncertain future is to emphasise portfolio diversity.”
The Towers Watson survey was conducted in November and December last year and received responses from 128 investment managers, economists, strategists and market analysts. The majority of respondents have more than 10 years of experience in the investment industry and most manage at least $1bn in both institutional and retail assets, with many managing moire than $50bn.