Investor Style Doesn’t Meet Expectation


    Europe’s wealthy Millennial investors expect an eight per cent annual average rate of return on their portfolios – yet their low risk appetite has prompted a prediction of disappointment, says a survey by Legg Mason Global Asset Management. The average expected annual return was 11 per cent, with Europe’s Millennials expecting eight per cent and U.S. Millennials harbouring the highest expectations, at 14 per cent. Globally, cash made up the largest part of portfolios with an average allocation of 24 per cent. Equities were, on average, the second largest allocation, at 19 per cent, followed by real estate (18 per cent) and fixed income (17 per cent). Legg Mason says that Millennials were also short-termist in their investment outlook. Asked to define a long-term investment horizon, 35 per cent say long-term was defined at two years or less, while 26 per cent say two to five years. A quarter say five to 10 years, and 13 per cent say more than 10 years. Matthew Schiffman, head of global marketing for Legg Mason, says Millennial risk appetite maybe influenced by history. “My generation came of age as investors during the risk-on environment of the 1980s when we were rewarded for taking risk. However, my parents were depression-era kids whose memories left them extremely cautious investors. Today, at least in the U.S., Millennials have come of age as investors during a tumultuous period – from the dotcom bust to the Great Recession. Like my parents’ generation, perhaps Millennials’ conservative approach to investing has been defined by the history of their lives. The question we have to ask is, with longevity increasing and all the attendant costs associated with it, by not investing in more growth-oriented assets where risk and return are commensurate, are Millennials putting themselves at risk downstream in terms of capital formation?” When it comes to how they invest in equities, 91 per cent of global Millennials say they have equity investments in exchange traded funds – with a high of 97 per cent in the U.S. and a low of 82 per cent in Australia.