Confidence in equity markets is increasing, according to Schroders survey
09 October 2013
By Asia Asset Management
Schroders investment conference in Athens, which took place on September 26-27, was attended by over 146 intermediary clients from more than 35 countries in Europe, the Middle East, Asia, the US and Latin America. They were surveyed on their outlook for several asset classes, as well as their views on interest rates and inflation over the medium term.
The results revealed that half of those surveyed expect European equities to be the best performing asset class over the next 12 months, while 20% favour US equities. Despite this confidence in European markets, 53% stated that global equities would be their favourite asset class for investment in 2014.
Of those surveyed, 15% expect emerging market equities to perform well over the next 12 months. While 72% are currently neutral or underweight the asset class in client portfolios, 51% expect to increase exposure to emerging market equities over the next six months, suggesting that confidence may be returning after recent volatility.
The survey also reaffirms concerns over inflationary pressure, initially highlighted in the survey conducted at the same conference in February this year. Seventy-two percent expect to be worrying more about inflation than deflation by 2018, however only 6% are currently looking to hedge against inflation in client portfolios. Looking at interest rates, 81% expect US rates to have risen by the end of 2015, while 80% do not expect interest rates in the eurozone to increase until 2015 or later.
In a somewhat volatile market environment, there is a notable interest in products that could protect against this, with 32% of those surveyed looking for portfolios that could generate growth without the volatility of equity markets, and 28% seeking to preserve wealth in volatile and unpredictable markets. A fifth is looking for products that yield a sustainable income. This reaffirms the results from similar surveys conducted last year, which highlighted the continued search for income.
Carlo Trabattoni, head of Pan European intermediary distribution and GFIG, said: “Overall these results indicate an increased appetite for risk assets across the board, with those surveyed consistently favouring these asset classes. The increased expectations for performance of European equities are in keeping with the results seen in our survey from this time last year, which highlighted a possible turning point in investor sentiment. Despite recent political events in Europe, our equities team is seeing a wealth of opportunities to benefit from the perceived ‘recovery story’ for the European economy, which is consistent with the expectations that clients have for the asset class.
“The concern about inflation in the medium-term is consistent with previous surveys; however the fact that only 6% are currently looking to hedge against inflation in client portfolios indicates that they have not yet started to take action against this concern. We are already seeing increasing client demand for outcome-oriented solutions, rather than benchmark driven products, that can provide income, growth or preserve wealth in volatile and unpredictable markets, and would expect to see more interest in products that can hedge against inflation as this becomes a more prominent issue.”
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