Sat, Apr 19, 2014
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   |   
Banner
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. Opalesque Exclusive: Classic Auto Funds Limited (CAF) launches several car investing funds[more]

    Bailey McCann, Opalesque New York: A new trend in alternative alternatives is emerging - car appreciation funds. Classic Auto Funds Limited (CAF) is the first to market with several funds that make super elite luxury cars into real asset investments. As a result of growing overseas demand couple

  2. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  3. Opalesque Exclusive: Hedge fund replicators evolve[more]

    Bailey McCann, Opalesque New York: Hedge fund replicators as a group of products tend to get a bad rap from hedge fund managers who suggest that the best a replicator can offer is dynamic beta capture. A

  4. Opalesque Exclusive: Pensions, endowments, family offices reconsider life settlement investments[more]

    Bailey McCann, Opalesque New York: Hedge funds were once the largest investors in the life settlement industry, now the industry is seeing more interest from pensions, endowments and family offices directly. Life settlements have always been considered a niche part of the investing landscape, an

  5. SEC allows investment funds to use social media[more]

    Bailey McCann, Opalesque New York: The Securities and Exchange Commission (SEC) has released new guidance letting investment funds and advisors use social media to promote client reviews. The guidance seeks to assist investment managers in developing compliance policies and procedures reasonably