“In the current environment, aiming for an income in the range of 8% to 9% is a near impossibility without taking on significant levels of risk,” said Chris Durack, CEO of Schroders in Hong Kong.
“However, avoiding risk is also unlikely to allow investors to achieve their investment goals.”
Hong Kong investors also tended to hold mutual fund investments for 3.4 years on average, the survey showed. According to Schroders, advisers tend to recommend investors hold funds for at least five years.
Millennials who were polled held mutual funds for only 2.6 years compared to 4.3 years for older investors. The survey also showed that among Hong Kong investors, high return expectations influenced product choice:
Main drivers in choosing an investment product (average importance ratings out of 10)
|Getting a return higher than inflation||7.7|
|Getting back at least the amount invested at the end||7.7|
|Long-term potential growth||7.5|
|Good track record/past performance of the investment||7.3|
|Reputation of company or manager||7.2|
Durack pointed out that entry valuations have a strong impact on eventual returns, especially if the investment product is held over the medium- to long-term.
According to the firm, over the past 40 years, the average annualised 3-year return in the global market was 17% when entry was made at 14 times price-to-earnings. That compares to 3.7% when investing at price-to-earnings of 24 times or above.
“Now, perhaps more than ever, it is important to invest in assets with sensible valuations. We would also caution that where low average returns are expected to prevail, strategies that involve chasing past performance or a ‘set and forget’ approach can be dangerous."
In Hong Kong, 500 investors with HK$86,000 ($11,000) or more in investible assets were surveyed. Globally, the survey polled 20,000 investors in 28 markets with at least €10,000 to invest.