May 21 2015

Retail investors are ‘unrealistic about growth’ – Schroders

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Retail investors are ‘unrealistic about growth’ – Schroders

Retail investors are displaying too much confidence about how their assets are likely to perform, James Rainbow has warned.

The head of financial institutions and strategic accounts for fund manager Schroders claimed that although investors were still demanding income they were also being unrealistic about prospects for growth.

He said: “Growth is returning but it could be challenging for investors to achieve returns of between 8-12 per cent, while only placing 14-21 per cent of their investment portfolio in higher risk assets.

“While a return of investor confidence should be celebrated, many investors are taking an unrealistic view on how their assets will perform in a market that is still dogged by the worst recession for a generation, and a de-synchronised monetary policy.”

Mr Rainbow warned that investors needed to balance both risk and return carefully when making their decisions rather than just focusing on either risk or potential return.

Adviser view

Laith Khalaf, senior analyst for Bristol-based Hargreaves Lansdown, said: “The recent bond sell-off is a reminder of the risk of investing in bonds at such low yields. This is heightened by the fact government bonds are seen as safe investments, and consequently feature in many pension funds and supposedly low-risk portfolios.

“Meanwhile, equities do not look cheap, but with the possible exception of the US, developed markets do not look particularly expensive either. However, in the light of such low bond yields, equities look attractive by default.”