Colonial First State has combined with the University of Western Australia (UWA) to leverage data from its platform flows from non-advised clients to confirm their appetite for equities has deteriorated over the past two years and remains subdued.
The data also confirms particularly subdued sentiment among female investors and those aged over 35, giving rise to concerns that they may ultimately emerge as being ill-prepared to meet their retirement savings objectives.
Colonial First State said that working with the UWA Business School, it had been able to introduce an accurate measure that focused on actual investor behaviour (non-advised investors) through managed fund flows to analyse investor sentiment.
"This is a unique measure, given investor sentiment in the past has been measured by survey rather than actual investor decisions," Colonial First State said.
"Managed fund flows provide a transparent measure of decisions made by a large set of investors who can be distinguished from institutional or professional investors."
It said the research showed low levels of confidence among retail investors remained an important impediment to them allocating to equity markets through managed funds following the Global Financial Crisis.
The Colonial First State analysis of the new measure said that, at this stage, it remained open to debate about whether the lower preference for equities was a temporary or permanent phenomenon.
"Current macroeconomic events continue to rattle investor confidence and investment markets leading to volatility and uncertainty," it said.
"In Australia the relative safety and return earned on term deposits has provided a safe haven for investors in this climate and likely added to the aversion to equity managed funds.
"If the preference against equities is temporary, we would expect to see equity preference resume once equity markets returns improve," the analysis said.
"Although given the length of volatile markets, we would expect a longer period of stable and positive returns would be needed to attract investors back in to equity markets."
