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Return expectations dramatically drop

New research from Natixis Global Asset Management makes grim reading, showing that IFAs think that UK investor returns will be slashed as turbulent markets undermine investor confidence.

Brexit gets the blame and Natixis says that investors can expect far less from their investment portfolios than 12 months ago. The new game in town for the financial markets is volatility, uncertainty and complexity. What’s more, says Natixis, financial advisers are casting doubt on the ability of portfolios to generate stable returns.

The research results show that when surveyed, adviser expectations for annual returns (above inflation) have fallen from 6.8% in 2015 to 3.8% now. This compares with global expectations for returns across 14 markets falling from 6.6% to 5.3%.

Deputy CEO at Natixis Global Asset Management Chris Jackson said: “With expectations for returns falling over the last year, the importance of true active management is even more important than ever.”

The research revealed that there are a number of bumps in the road ahead, including:

  • 71% of advisers agreeing that managing client emotions will become the greatest challenge for advisers;
  • 78% saying that market volatility will continue to run at high levels
  • 55% admitting that market volatility is the topic most clients are demanding more information about in the last twelve months
  • 59% expecting stock valuations not to decrease globally and almost half predicting that global economic growth will decrease.

Jackson again: “For many investors, alternative investments are the missing link in achieving true portfolio diversification as they offer returns that are uncorrelated to the stock market. Portfolios that are more diversified do tend to produce better returns with lower risk.

“If you look at the underlying drivers – market complexity, volatility and the growing retirement funding burden – the value of professional advice is becoming more important than ever,” said Jackson. “Investors may feel compelled to make emotional decisions in reaction to market volatility yet by doing so they will almost always miss out on market return.”

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