Research published today by the Investment Management Association (IMA)* reveals that although UK investor confidence has fallen over the last six months, the majority (62%) of UK investors plan to add to their investments.
According to the IMA's Investor Perspectives Survey (IPS), a third (35%) of UK investors intend to invest in a new investment product within the next 12 months, while almost half (46%) plan to add to existing investments. Only 20% are considering withdrawing money.
Investor confidence and intentions
The IMA's Confidence Index,** revealing investors' outlook for the market over the next twelve months, shows a drop in confidence compared to six months earlier. This may have been influenced by the ongoing market volatility and decline in stock markets seen in September, when the survey was undertaken. The index registered 85 (out of a possible 200), compared with 104 six months earlier.
However, the IMA's Intentions Index, which reflects investors' intentions over the next six to twelve months, shows that investors remain positive overall. On a scale of 0-200, the index was 104 in September 2011, having remained broadly steady over the previous twelve months.
Richard Saunders, Chief Executive of the IMA said:
"Despite the downturn in confidence, investor appetite to add to their investments remains strong. Our survey suggests that UK investors are far from panicking. This is borne out by our sales statistics, showing that investors have carried on adding to their portfolios even at a somewhat reduced rate over the summer."
Investors favour equities but believe commodities will produce the best returns
Although confidence has declined, investors' belief in equities appears to be holding strong. Looking at those investors who plan to take out a new product in the next twelve months,*** around half (49%) intend to invest in equities, even though only 6% say it will be the least risky asset class to invest in over the next twelve months. Just over a quarter (27%) say they will invest in fixed income products, while a sixth (17%) plan to invest in commodities.
Recent IMA statistics**** reflect what investors themselves say. In Quarter 3 2011, gross sales of equity funds accounted for 51% of all gross sales of investment funds, compared with only 18% for bond funds. Looking at total funds under management, 53% is managed in equity funds, showing that equities remain the asset class of choice for UK investors in investment funds.
However, only one in five (21%) UK investors planning to invest in new products believe equities will produce the best returns. Instead the largest proportion (31%) believe that commodities will do best.
UK investors' risk appetite appears steady: they plan to invest in equities, while acknowledging that other asset classes carry less risk. Almost a quarter (23%) of those who plan to take out a new investment product identified fixed income as the least risky asset class to invest in over the next twelve months. 20% selected cash, while 18% thought commodities would be the least risky asset.
Richard Saunders continued:
"Often we hear about retail investors pursuing a herd mentality, buying at the top and selling at the bottom. But our findings suggest a stalwart investor committed to saving for the long term, despite market volatility. Almost half intend to invest in the stock market in the coming months."
Of those investors planning to invest in the next 12 months:
|
Asset class where investors plan to invest |
Asset class investors believe will produce best returns |
Asset class investors believe will be the least risky |
|
1. Equities - 49% |
Commodities - 31% |
Fixed income - 23% |
|
2. Fixed income - 27% |
Equities - 21% |
Cash - 20% |
|
3. Cash - 26% |
Property - 12% |
Commodities - 18% |
|
4. Property - 19% |
Fixed income - 8% |
Property - 16% |
|
5. Commodities - 17% |
Cash - 5% |
Equities - 6% |
Eurozone fears persist, while confidence in the UK holds steady
UK investors who plan to take out a new product*** are uneasy about the Eurozone, with 44% citing the European debt crisis as the primary economic event or trend they are most concerned might impact upon their investment returns. Over half (53%) of UK investors said they were nervous about investing in the Eurozone over the next twelve months.
However, investor confidence in the UK has held strong, with over half (51%) planning to invest in UK securities over the next 12 months, compared with only 11% in Eurozone securities. Although only 21% of investors plan to invest in the Far East, their belief in the potential returns of the region is high, with 30% saying it will produce the best returns over the next twelve months.
The IMA's sales statistics**** show that investors in funds have already been selling investments in Eurozone equities this year whilst continuing to put money into equity funds invested in other regions. The biggest inflows have been into UK equity funds, with year to date net retail inflows into UK equity funds totalling £1.3 billion, compared with net retail outflows for the same period of £731 million from European funds.
Richard Saunders concluded:
"UK investors are clearly worried about the effect a European debt crisis might have on their investments. However, their confidence in the UK appears strong. Our findings suggest that investors are treating the UK as a safe haven in a climate of increasing uncertainty and market volatility."
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