When respondents were asked to estimate their expected investment return in the coming year, a quarter (24%) expected returns exceeding 10% and just 7% expected returns to be under 2% or negative
Dubai: New research* from Old Mutual International and Quilter Investors shows investors in the United Arab Emirates (UAE) may be susceptible to over-estimating the potential for investment growth in the coming year.
When respondents were asked to estimate their expected investment return in the coming year, a quarter (24%) expected returns exceeding 10% and just 7% expected returns to be under 2% or negative.
Global financial markets suffered in 2018. Through the latter half of the year, stock market indices in the US gave up gains made earlier in the year and finished in negative territory. This was echoed in the survey as 69% of respondents blamed market volatility as the reason why their investment returns fell below expectations.
Meanwhile, almost all other asset classes suffered a challenging year as a range of fears over a global trade war, economic slowdown and fluctuating oil prices concerned investment markets.
While people’s expectations are still very positive, they have lowered since 2017 when 28% of respondents expected to achieve over 10% in returns for 2018. Despite this drop, over 10% returns was still the most popular category among respondents.
Paul Evans, Head of Region, Middle East & Africa, Old Mutual International, comments:
“A positive outlook is typically a positive trait to have. However, in the world of investment, it should be tempered with a realistic outlook, especially considering how volatile the market place is at present.
“Some people might see a sharp drop in the value of their investments and decide that they want to cut and run because their positive outlook has been shattered. However, if they have taken financial advice, their adviser should explain that staying locked in for the long-term can ultimately get better returns.”
Danny Knight, Investment Director at Quilter Investors, says:
“We know from experience that patient investors can expect to realise capital growth as a reward for time in the market and long-term investment. However, investors still need to be prepared for the fact that over the course of their investment journey, there will be ups and downs. This research suggests that many investors hold optimistic expectations for investment returns in the near-term.
“This can place them at risk of losing sight of their long-term objectives if their near-term expectations are not met. The volatility we saw in 2018 is normal and even slightly below the historical average, but it is much more pronounced than investors have become used to since the financial crash. We caution that investors may be at risk of recency bias, whereby a ten year bull run has clouded expectation and left investors with unrealistic expectations.
“An important tool for managing expectations and helping investors stay true to their long-term goals through all market conditions can be the use of risk targeting in investment portfolios. This gives investors confidence and reassurance about how their portfolio can be expected to behave under various market conditions, and what level of volatility they can expect to experience during their investment journey. Now more than ever, it is crucial that investors have realistic risk and return expectations and choose a portfolio which is carefully managed according to their own expectations.
“While global markets remain fundamentally sound and we believe there are still growth opportunities available for skilled managers, it would be fair to take a measured view on expected returns for this year. The important thing to remember in these moments is that investing is a long-term game. Rallies often follow periods of volatility or decline, and even if markets underwhelm in the near-term, the only way to capture the corresponding upturn is to remain invested.”
*Old Mutual International and Quilter Investors investment and retirement research, August 2018. A targeted piece of research, aimed specifically at investors living in the UAE (mainly Dubai and Abu Dhabi) who use the services of a professional to invest in the stock market. Investors needed to have a minimum of US$50,000 invested. 130 responses were received in total and were a representative cross section of those living in the UAE (expats, Non-resident Indians and Gulf Cooperation Council Nationals).
About Old Mutual International, Quilter Investors and Quilter plc:
Old Mutual International is a leading cross-border provider of wealth managementsolutions and part of Quilter plc.
Quilter Investors is part of Quilter plc. It provides multi-asset investment solutions designed for advised clients in the UK and internationally and manages 18.8bn on behalf of its investors (as at 30 September 2018).
Quilter Cheviot is one of the UK’s largest discretionary investment management firms with over £24.4 billion of assets under management (As at 30 September 2018).
Quilter plc is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.
Quilter plc oversees £118.1 billion in customer investments (as at 30 September 2018).
It has an adviser and customer offering spanning: financial advice; investment platforms; multi-asset investment solutions and discretionary fund management.
The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.
Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.
Advice and Wealth Management encompasses the financial planning network, Intrinsic; Quilter Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Quilter Investors, the Multi-asset investment solutions business.
The Quilter plc businesses are being re-branded to Quilter over a period of approximately two years:
• The Multi-asset business is now Quilter Investors • Intrinsic to Quilter Financial Planning • The private client advisers business is now Quilter Private Client Advisers • The UK Platform to Quilter Wealth Solutions • The International business to Quilter International • The Heritage life assurance business to Quilter Life Assurance • Quilter Cheviot will retain its name
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Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.
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