Private investors expect to achieve significantly higher returns compared to professional investors. The ‘expectation gap’ worldwide is currently 174 percent in the long term. This is 53 percentage points more than in 2020.
This was shown in research by Natixis Investment Managers among 8,550 individual investors. A large proportion of the investors surveyed, all with more than USD 100,000 in investable assets, achieved double-digit returns in 2020. The majority of them are also very positive about 2021.
Professionals more conservative
On average, they expect to achieve annual returns of 13 per cent above inflation in 2021. In contrast, investment professionals are much more conservative for the second half of this year. They predict a return this year of at most 5.3 per cent above inflation.
Given the high returns achieved by investors in 2020, 50 per cent of those surveyed have not made any changes to their investment accounts as a result of Covid-19. Three-quarters of millennials surveyed made some changes to their investment accounts.
This group was more likely to increase their investments as a result of the pandemic (23 percent versus 19 percent overall), expand online trading activity (32 percent versus 23 percent overall) and increase trading activity through an advisor (24 percent versus 18 percent overall).
Some do well, others less
While millennials were most likely to increase their investments and trading activities, they were also most likely to cancel savings and investment accounts (24 per cent versus 19 per cent), a number that matches the 28 per cent who said they had lost their family income and 12 per cent who had lost their job or business for at least part of the year as a result of the Covid-19.
European investors are particularly concerned about a slow economic recovery. Almost 80 per cent of investors say they prefer safety to investment return.
It is striking that the return expectations and the financial threats are seen separately from each other. More than half (53 per cent) of investors in Europe say they are willing to take risks to achieve higher returns. Almost seven in ten (66 per cent) recognise that market movements of 10 per cent up or down are a normal occurrence and a similar number (64 per cent) believe that volatility offers opportunities to grow their assets.
Safety valued highly
However, three-quarters (76 per cent) of European investors also say they prefer safety to investment performance, and more than half (52 per cent) believe volatility undermines their savings and investment goals. This may explain why, despite the potential opportunities, volatility is ranked as one of the biggest concerns (32 per cent), alongside a slow economic recovery (36 per cent) and low interest rates (31 per cent).
Individual investors in Europe fared better during the pandemic compared to other regions, with six out of ten reporting that they experienced little or no financial impact from Covid-19.
Sentiment in Europe is more positive than in Asia and Latin America. Six in 10 investors say they feel confident about their finances and overall, two-thirds say they are confident in their financial security, most prominently in Germany (74 per cent), the Netherlands (78 per cent), Switzerland (70 per cent) and the UK (71 per cent).