Key findings of the Investment Trends 2014 Investor Product Needs Report:
- Investors’ appetite for growth is slowly returning, and many investors continue to look overseas for investment opportunities
- Interest in managed funds is making a comeback, particularly among the younger age segments
- The number of investors in capital protected products has stabilised in 2014, after falling over the preceding four years. Looking forward, there is growing interest in these products but planners will play a key role in encouraging greater take-up
The 2014 Investor Product Needs Report is an in-depth study of Australian investors’ investing behaviour and their usage of various investment products. The study is based on a survey of 10,645 Australian investors concluded in Q4 2014. This year’s study highlights a number of interesting trends:
Investors’ appetite for growth is slowly returning, and many investors continue to look overseas for investment opportunities
For the past five years, each year there has been an increasing proportion of investors who have been prioritising income as their primary investment goal. In 2014, this number fell for the first time since we started conducting this study, with 33% of Australian investors prioritising income as their primary investment goal, down three percentage points from 2013.
“For a number of years, particularly between 2012 and 2013, we had been seeing investors becoming increasingly focused on income-focused investments,” said Investment Trends Analyst King Loong Choi. “In 2014, we started to see a reversal of this trend as more investors started to prioritise growth-oriented investments.”
“The increased appetite for growth has been driven by investors’ concern with the world’s financial markets gradually declining over the last 18 months” said Investment Trends Analyst King Loong Choi.
However, investors’ outlook for the Australian stock market remains quite low, with investors’ capital return expectations for domestic equities falling from 6% per annum in January 2014 to 2% per annum in December 2014.
“The difficulty in identifying investment opportunities in the domestic market is fuelling the appetite for more overseas exposure.”
Interest in managed funds is making a comeback, particularly among the younger age segments
Managed funds continue to account for a small proportion of investors’ portfolios, with the average investor allocating only 8% of their portfolio to managed funds.
Looking forward, interest in managed funds has picked up with 46% of investors saying they are open to considering an unlisted managed fund investment, including 7% who intend to make a managed fund investment in the next 12 months.
“Investors’ interest in managed funds started to return in 2014, partly driven by their growing desire for greater diversification – both domestic and international – in their portfolios,” said Choi. “Younger investors are typically more open to investing in managed funds in the future than older investors.”
The number of investors in capital protected products has stabilised in 2014, after falling over the preceding four years. Looking forward, there is growing interest in these products but planners will play a key role in encouraging greater take-up
There is currently an opportunity for the capital protected products market given the current environment of record low interest rates, rising asset prices, coupled with increased uncertainty.
“As more investors look to chase growth opportunities in the coming year, fear of market reversals could drive demand for products offering market protection,” said Choi.
The number of capital protected product investors stabilised at 29,000 in 2014, after falling 46% between 2009 and 2013. Looking forward, there is growing interest in these products with 32,000 investors saying they intend to invest in these product in the next 12 months, up from 22,000 in 2013 (though not all will do so).
“To capitalise on the renewed interest in using capital protected products, product providers can assist greater uptake by helping investors address certain key barriers such as lack of transparency, satisfying certain gaps in the range of products available and improving investors’ understanding of these products.”
“Financial planners will play a key role in helping investors overcome these barriers, with half of existing capital protected product investors saying their adviser played a role in their most recent capital protected product investment.”
