- 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
- A slow economic recovery tops the list of investment concerns for investors in Europe at 36%, but over half (53%) of UK investors cite low interest rates as the biggest investment concern
- Investors are vigilant to recovery risks, with four fifths (80%) of UK investors preferring safety over investment performance
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.”
Europe: Investors define the “average” COVID experience
Individuals in Europe fared better during the pandemic than other regions with six in ten reporting they experienced no impact from COVID-19. As a region, they report infection rates of 7% for individuals and 10% for their household, with moderate financial impacts from the pandemic.
The combination of swift action by policy makers and higher income levels among the respondent pool resulted in just 7% of investors losing their job or business for part of the year, and less than one in five (19%) losing household income. Financial prospects were also buoyed by average investment returns of 11.2% above inflation. As a result, just 11% of Europeans believe they experienced a significant setback to their financial security during the pandemic – the lowest number in any region.
Sentiment in Europe is more positive than Asia and Latin America. Six in ten investors say they feel assured about their finances, rather than stressed and overall, two-thirds say they are confident about their financial security, most prominently in Germany (74%), the Netherlands (78%), Switzerland (70%) and the UK (71%).
Investors find key investment and personal finance lessons in the pandemic
Beyond the risk concerns, investors also share a wide range of financial fears. When asked to select their biggest fears survey respondents in Europe highlighted a large, unexpected expense at the top of the list (30%). This sort of surprise was what worried investors most when asked in 2019, but the current environment has recast financial fears for many.
Whilst the survey revealed the various financial fears of investors, the global pandemic has helped them recognize a course of action to be better prepared for the next crisis. When asked what they’ve learned from the pandemic, most point to addressing key personal finance issues. Almost two fifths (39%) say they learned the importance of keeping their spending in check, while 23% say they learned the importance of avoiding emotional investment decisions and having an emergency savings account (20%).
A spotlight on global investment habits across generations
Given the high levels of returns investors achieved in 2020, 50% of those surveyed had made no changes in their investment accounts as a result of Covid-19.
Millennials were the most likely group to adjust, with 74% surveyed making some changes to their investment accounts. This demographic was more likely to increase their investments as a result of the pandemic (23% vs. 19% overall), step up their online trading activities (32% vs. 23% overall) and increase trading activities through their advisor (24% vs. 18% overall). Even as they increased trading, less than 10% (9%) globally said they opened up margin accounts that might fund these efforts.
Whilst Millennials were most likely to increase investments and trading activity, they were also more likely to make withdrawals from savings and investment accounts (24% vs. 19%) a number that aligns with the 28% who said they lost household income and 12% who lost their job or business for at least part of the year as a result of Covid-19.
Andrew Benton, Head of Northern Europe at Natixis Investment Managers added: “The pandemic has been a stress test as much on personal finances as the global economy. Investors have an appreciation for the invaluable lessons from the Covid-19 pandemic and coming out of the pandemic and into recovery, they clearly see opportunities to invest for growth. However, going forward, investors need to carefully consider the results they can realistically hope to achieve and rationalize those expectations with genuine tolerance for risk.”
The full report of the 2021 Natixis Global Individual Investor Survey ‘The Next Normal’ is available here: https://www.im.natixis.com/intl/research/2021-natixis-global-survey-of-individual-investors.
About the Natixis Center for Investor Insight
Investing can be complicated: Event risk is greater and more frequent. Volatility is persistent despite market gains. And investment products are more complex. These factors and others weigh on the psyche of investors and shape their attitudes and perceptions, which ultimately influence their investment decisions. The Center for Investor Insight conducts research with investors around the globe to gain an understanding of their feelings about risk, their attitudes toward the markets and their perceptions of investing.
*Natixis Investment Managers’ 2021 Global Individual Investor Survey was conducted by CoreData Research in February and March 2021. The survey included 8550 individual investors in 24 countries and regions including Asia, Europe, Latin America, and North America. In the UK, Natixis surveyed 500 investors with a minimum of $100,000 in investable assets. The age groups are broken up as follows: Generation Y 22% (25-40years old), Gen X 26% (41–56 years old), Baby Boomers 47% (57-75 years old) and from the Silent Generation 6% (76 years and older).
In Europe Natixis Investment Managers surveyed 3100 individual investors with a minimum of $100,000 in investable assets. The age groups are broken up as follows: Generation Y 27% (25-40years old), Gen X 34% (41–56 years old), Baby Boomers 35% (57-75 years old) and from the Silent Generation 3% (76 years and older).
About Natixis Investment Managers
Natixis Investment Managers serves financial professionals with more insightful ways to construct portfolios. Powered by the expertise of more than 20 specialized investment managers globally, we apply Active Thinking® to deliver proactive solutions that help clients pursue better outcomes in all markets. Natixis Investment Managers ranks among the world’s largest asset management firms1 with €1.135 billion assets under management.2
Headquartered in Paris and Boston, Natixis Investment Managers is a subsidiary of Natixis. Listed on the Paris Stock Exchange, Natixis is a subsidiary of BPCE, the second-largest banking group in France. Natixis Investment Managers’ affiliated investment management firms include AEW; Alliance Entreprendre; AlphaSimplex Group; DNCA Investments;3 Dorval Asset Management; Flexstone Partners; Gateway Investment Advisers; H2O Asset Management; Harris Associates; Investors Mutual Limited; Loomis, Sayles & Company; Mirova; MV Credit; Naxicap Partners; Ossiam; Ostrum Asset Management; Seeyond; Seventure Partners; Thematics Asset Management; Vauban Infrastructure Partners; Vaughan Nelson Investment Management; Vega Investment Managers;4 and WCM Investment Management. Additionally, investment solutions are offered through Natixis Investment Managers Solutions, and Natixis Advisors offers other investment services through its AIA and MPA division. Not all offerings available in all jurisdictions. For additional information, please visit Natixis Investment Managers’ website at im.natixis.com | LinkedIn: linkedin.com/company/natixis-investment-managers.
Natixis Investment Managers’ distribution and service groups include Natixis Distribution, L.P., a limited purpose broker-dealer and the distributor of various U.S. registered investment companies for which advisory services are provided by affiliated firms of Natixis Investment Managers, Natixis Investment Managers S.A. (Luxembourg), Natixis Investment Managers International (France), and their affiliated distribution and service entities in Europe and Asia.
2 Assets under management (“AUM”) as of December 31, 2020 is €1.135 billion AUM, as reported, may include notional assets, assets serviced, gross assets, assets of minority-owned affiliated entities and other types of non-regulatory AUM managed or serviced by firms affiliated with Natixis Investment Managers.
3 A brand of DNCA Finance.
4 A wholly-owned subsidiary of Natixis Wealth Management.
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