Tue, Oct 17, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Significant gap between investors’ return expectations and market reality- Legg Mason

Monday, March 04, 2013
Opalesque Industry Update: Investors around the world are receiving annual returns from their income-producing investments that are, on average, almost 3% lower than they desire, according to a major new survey from global asset manager, Legg Mason Global Asset Management.

The survey, which polled over 3,000 respondents across 13 countries, reveals that investors are seeking, on average, an annual investment return of 8.9%, but in reality are receiving 6.1%: a shortfall of 2.8%.

Investors in the UK are among the least unsatisfied, with the ‘reality gap’ standing at just -1.5% (target rate of 7.7% minus an actual rate of 6.2%). US investors, on the other hand, are far more dissatisfied, desiring an annual return of 8.5% but actually receiving 5.9%: a gap of -2.6%. The most dissatisfied investors globally are from Taiwan, where the average return shortfall stands at -4.0% (desired return of 10.0% against an actual rate of 6.0%), while Spanish investors have the largest expectation gap across Europe at -2.9%. Chinese investors have the highest outright return expectations at 10.5% (leaving a -3.4% gap between their preferred return and their actual return of 7.1%).

Investors’ quest for higher yield is evidenced by the fact that 54% of those polled say they are willing to take on more risk to achieve greater investment income. In line with their high return expectations, the investors most likely to move up the risk spectrum for greater yield are Chinese, of whom 77% say they are willing to take on more risk to generate more income. Asian investors generally are, in fact, the most willing to assume more risk for a higher yield, with Singapore (73%) and Hong Kong (63%) completing the top three in the risk table.

Japan, however, is a notable exception, with just 36% of investors saying they are prepared to assume more risk. The UK (55%) and US (51%) rank broadly in the middle of the table while the investors least disposed to take on more risk are from France (29%) and, in line with Japan, Germany (36%).

While the survey suggests the majority of yield-seeking investors generally are willing to assume more risk, it also finds that 54% of investors classify themselves as ‘conservative’ when it comes to investing in income generating products. Nonetheless, 69% of investors say income is now important or extremely important to them. Indeed, this emphasis has increased in recent years, with more than half (57%) of respondents saying income is somewhat more important or much more important to them compared to five years ago.

Matt Schiffman, managing director and head of global marketing at Legg Mason Global Asset Management, commented: “There is clearly a significant gap between what investors want in terms of return from their income-generating investments and what they are actually receiving. Indeed, this gap is likely to be wider in reality given the disparity between asset class performance over the last 12 months and the return investors believe they are getting from their income-based investments.

“Investors looking to boost their income clearly need to become less cautious if they are to hope to achieve their expectations. But while the majority of investors say they are prepared to do so, the evidence – and the fact more than half still consider themselves to be conservative investors – suggests they are not yet willing to accept more risk for potentially greater reward.”

Legg Mason

Press Release

BM

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Regulatory - David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge, Carried interest tax: How much does it matter?, Odey sees 'terrifying' mix in MiFID, tapering, asset values, Hedge funds come together to share cost of MiFID and research, SEC turns up the heat on U.S. investment advisers, India's Sebi asks hedge funds to report investments in commodity derivatives[more]

    David Stockman: Trump tax reform overhaul is a pipe dream, stocks are heading for 40-70% plunge From CNBC.com: David Stockman is warning about the Trump administration's tax overhaul plan, Federal Reserve policy, saying they could play into a severe stock market sell-off. Stockman, the R

  2. North America - Puerto Rico rejects loan offers, accusing hedge funds of trying to profit off hurricanes[more]

    From TheIintercept.com: Puerto Rico has rejected a bondholder group's offer to issue the territory additional debt as a response to the devastation of Hurricane Maria. Officials with Puerto Rico's Fiscal Agency and Financial Advisory Authority said the offer was "not viable" and would harm the islan

  3. Investing - WPP targeted by short-selling American hedge fund, Sun co-founder sells secretive hedge fund on big chip trade[more]

    WPP targeted by short-selling American hedge fund From Cityam.com: An American hedge fund has mounted a bet against WPP, the world's largest advertising group, with a trade worth almost £90m. Lone Pine Capital has built a short position worth 0.51 per cent of the FTSE 100 company,

  4. Hedge funds up as industry adjusts to rising rates[more]

    Komfie Manalo, Opalesque Asia: Hedge funds have reshuffled their portfolio after nearly four weeks of rising rates as the Lyxor Hedge Fund Index was up +0.2% from 19 September to 26 (+1.1% YTD), fuelled by strong results of global macro funds, Lyxor Ass

  5. Manager Profile - How the world's hedge fund king used 'idea meritocracy' to become a billionaire[more]

    From Forbes.com: In 1982, Ray Dalio made what he calls the biggest mistake of his life. He made a bet that there would be an economic collapse stemming from a debt crisis. And he was wrong. He lost money. He lost his client's money. He had to let people go from his firm and borrow money from his dad