A new survey by Natixis Investment Managers finds that the expectations for long term returns differs significantly between investors and financial professionals at 14.5% and 5.3% respectively.
Covid-19 has led to a growing divergence in long-term return expectations post-pandemic between investors and financial professionals, according to a global survey of 8,550 individual investors by Natixis Investment Managers. The survey of investors with more than $100,000 in investable assets, found that a high proportion are optimistic given the double-digit returns earned in 2020, and so expect to achieve annual returns of 13% above inflation in 2021.
Over the long term, return expectations run even greater at 14.5% above inflation or 174% greater than the 5.3% financial professionals say is realistic. For the UK, the expectations gap rises to 206%, with investors anticipating 14.1% above inflation compared to financial professionals’ prediction of 4.6%.
Investors’ expectations disconnected from financial fears
In order to pursue higher returns, investors suggest they are more willing to take on risk, with over half (53%) of investors in Europe saying they are comfortable taking risks in order to get ahead. Almost seven in ten (66%) recognize that market movements of 10% up or down are a normal occurrence and a similar number (64%) believe volatility creates opportunity to growth their wealth.
However, three-quarters (76%) of investors in Europe say they also prefer safety over investment performance, with more than half (52%) believing volatility undermines their savings and investment goals. This may explain why, despite the potential opportunities, volatility ranks as one of the top risk concerns (32%), alongside a slow economic recovery (36%) and low interest rates (31%). Interestingly, for UK investors, low interest rates are far more of a concern, with 53% highlighting it as one of their top three concerns. The long-term impact of the Bank of England’s public spending effort is also weighing on investors, as one-quarter (23%) of those surveyed highlight potential tax increases as a looming risk.
Andrew Benton, Head of Northern Europe at Natixis Investment Managers, commented:
“Current market sentiment indicates that investors are looking for fresh opportunities to make the ‘new normal’ a commensurate counterbalance to the challenges of the past year. While investors have great expectations for the post-COVID investment landscape, our survey shows a persistent desire for safety over investment performance, and fundamental concerns about volatility could test investors mettle if faced with any market turbulence.”