Key findings of the Investment Trends 2015 Investor Product Needs Report:
- Investors are finding it harder to identify investment opportunities in the current market environment
- Interest in managed funds is growing among investors, with the direct channel playing a more prominent role in recent years
- Investors’ desire for income, coupled with the current low interest rate environment, has created an opportunity for income-focused products
The 2015 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 9,793 Australian investors concluded in October 2015. This year’s study highlights a number of interesting trends:
Investors are finding it harder to identify investment opportunities in the current market environment
Investor concern levels have continued to rise from 2014 lows and are back at levels last seen three years ago. This trend is largely fuelled by growing concerns about the slowdown in China and the impact this might have on the Australian economy.
“Investor outlook for the Australian stock market was very bearish throughout 2015,” said Investment Trends Senior Analyst King Loong Choi. “As a natural outcome of falling confidence, investors are becoming more risk averse in their approach to investing.”
“However, there is an important distinction in their investment behaviour this time round – the flock to safety in the form of cash and term deposits we saw in 2011-12 has not materialised in 2015,” said Choi. “Over half of investors are still on the hunt for capital growth when selecting investments in the coming year.”
Interest in managed funds is growing among investors, with the direct channel playing a more prominent role in recent years
The challenge in the current environment is that investors are finding it harder to identify domestic investment opportunities themselves. As a result, more are turning to professional fund managers.
Following a decline in the usage of unlisted managed funds in the aftermath of the GFC, there has been a resurgence in appetite. Investors have been steadily increasing their portfolio allocation to unlisted managed funds over the past few years, which now account for 9% of their investable assets.
Interest in investing in unlisted managed funds is also growing with 15% of investors saying they intend to invest in unlisted managed in the future, up from 12% two years ago.
While advisers play a prominent role in driving managed funds usage, in recent years investing in managed funds has become an increasingly self-directed activity. Word of mouth and online channels are growing in importance in instigating managed funds investments.
“Investors’ interest in unlisted managed funds is driven by their desire for greater diversification in their portfolios,” said Choi. “But what sets unlisted managed funds apart from other diversified investment products is their ability to give investors access to products and strategies which they cannot easily access or replicate themselves.”
Investors’ desire for income, coupled with the current low interest rate environment, has created an opportunity for income-focused products
Investors’ desire for income-focused investments remains significant, with 34% saying their primary investment goal over the next year is to maximise income. However, the current low interest rate environment has meant traditional income generating products such as cash accounts and term deposits are less appealing to investors.
“Investors are looking for a more diverse range of investments to gain their income exposure,” said Choi. “This is creating opportunities for providers of income-focused products.”
Bonds and fixed income ETFs feature prominently among the most common vehicles investors intend to use to obtain their income exposure in the coming year.
“Providers of income-focused investments can stimulate greater adoption of their products, with three out of four investors seeking help to grow their usage of these investments,” said Choi. “Greater investor education, among other things, will be a key catalyst for realising this potential.”
About Investment Trends
Investment Trends is the leading specialist market research organisation in the Australian retail wealth management industry, and also operates in the US, UK, Germany, France, Spain, Hong Kong and Singapore. We provide new insights and decision support information to over 200 leading financial services businesses. We combine analytical rigour and strategic thinking with the most advanced research and statistical techniques to help our clients gain competitive advantage.
Investment Trends’ clients include all of the top five Australian banks, the top ten investment platform providers, the top five online brokers, as well as industry regulators, leading margin lenders, dealer groups, financial planning software providers and product providers.
About the report
The results are drawn from the Investment Trends October 2015 Investor Product Needs Report, released to Investment Trends’ clients in December. This report was based on a survey of 9,793 Australian investors concluded in October 2015.
