Aussie investors adopt more defensive stance

31 January 2020

More Australian investors are prioritising capital preservation and generating a stable income stream as the average investor expects the All Ordinaries Index to rise 1.9% over the next 12 months, according to a report.

The latest Investment Trends report found more investors’ main goals would be to protect their assets and income from market falls (15%, up from 11% the previous year). Fewer were aiming to maximise capital growth at 21%, down from 26%.

The firm’s senior analyst, King Loong Choi said: “More investors are prioritising capital preservation and generating a stable income stream. To effectively achieve these priorities, many realise they need a diversified portfolio, which has led to the rising adoption of managed investment products.

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“Across the range of managed investments, Australian investors currently allocate the largest proportion of their total portfolio to unlisted managed funds (7%, on average), while ASX-listed investments such as exchange traded funds and listed investment companies are gaining popularity (both 4%, up from 3% in 2018).”

Choi said Australians had gradually revised their outlook for domestic stocks downwards as global macroeconomic and geopolitical tensions continued to weigh heavily on investors to adopt a more defensive stand in asset allocation.

The report also found that three-in-10 investors considered environmental, social, and governance (ESG) factors when selecting or avoiding certain investments. Another 14% intended to in the future, and 19% were interested in learning more.

“Older, wealthier investors place greater importance in good corporate governance standards when selecting investments, while the younger generation are more likely to be attracted to companies that demonstrate ethical, social and environmental values,” said Choi.

“While more ESG-centric products are being launched at pace, it is important for providers to understand that the priorities of Australians are highly nuanced across the many facets of ESG. There is no one size fits all approach, and providers will do well to understand the evolving needs of the retail investing population.”

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