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‘Expert’ investors empowered to prioritise values

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MEDIA RELEASE: Schroders’ flagship study surveyed over 23,000 people who invest from 33 locations globally, including 1000 Australian investors. The results globally show that investors who class themselves as being ‘expert’ are more focused on the role their principles and values can play in their investment decisions.

This sentiment has been reiterated in Australia, with 39% of investors stating their personal principles were ‘very important’ to them, with 71% of those having ‘expert’ investment knowledge.

Investment knowledge

Whilst we can see from the data as peoples’ investment knowledge grows their personal principles become more of a priority, though this doesn’t correlate with people getting older. Younger investors are seeking funds that more closely align with their values and principles, with more than three-quarters (79%) of people aged 18-37 choosing to prioritise these factors.

When identifying the engagement priorities that are most important to investors natural capital and biodiversity (65%), human capital management (63%) and climate (60%) were the top three issues. These areas also ranked highest for 18–37-year-olds, in particular climate (65%), which highlights the importance of funds offering and showcasing their sustainable investment offerings, for the growing millennial segment of the population.

Knowledge is power

Whilst investors have told us what corporate themes are important to them, do they feel empowered to make a change? Overall, the results show that people feel overwhelmingly that shareholders should have the power to influence the companies they are invested in. However, whilst younger investors believe they should have the power to influence (78%), investment knowledge is an important factor. When looking across the investment knowledge spectrum, it’s clear that confidence is key to inciting change with 88% of ‘expert’ level and 76% ‘advanced’ level investors believing they are empowered to make a change.

When it comes to decision making, 80% of Australian respondents agree that they have sufficient knowledge to feel confident in making investment decisions that affect their future. Unsurprisingly, 88% of expert/advanced investors feel they have the right knowledge for their financial future, as well as 40% of beginner/rudimentary investors, much higher than the global figure (only 26%).

Whilst it seems Australians are confident in their financial decision making, ongoing education is crucial but not many people believe it should be up to themselves (12%). Instead, everyone has a role to play, with the onus being on financial providers (52%) and financial advisers (35%) to lead the way.

Sam Hallinan, Schroders Australia CEO, commented:

“This year’s Study revealed that investors are increasingly seeking to align their investments with their principles and values, and this is particularly strong amongst younger investors aged 18-37.

Our industry is responding to this preference by incorporating sustainability principles into investment funds as well as developing thematic investments.

Today’s investors are taking on more of the responsibility when it comes to financial decision making, and predictably investors with high levels of investment knowledge feel the most empowered. As an industry we play a crucial role in ensuring investors have access to information that supports empowered decision-making – with investors’ highest expectations resting with financial providers and financial advisers.”

Investor interests, behaviour and return expectations

The study indicates that people are diversifying into asset classes that might previously have been seen to be off limits, with 66% wanting to invest in private equity, digital assets (54%) and physical assets such as art or wine (53%).  Interest in private equity and digital assets was highest amongst younger investors, with 73% of 18–37-year-old investors interested in private equity and 59% in digital assets.

Australian investors are expecting an average annual return of 10.41% on their investment portfolios over the next five years, down from 10.56% p.a. in 2021, and lower than the global expectation of 11.37% p.a. This is also slightly lower than returns delivered over the past five years, reported by Australian investors to be 10.69% p.a.

Claire Smith, Alternatives Director, commented:

“The Survey’s findings that an increasing number of individual investors are looking to invest in private assets to achieve diversification supports conversations we’re having with financial advisers and behaviour we’re seeing from advisers and their clients. In response to this rising interest, the Schroder Specialist Private Equity Fund has been designed to allow broader access to private equity investments, offering a semi-liquid structure that is widely available on Australian investment platforms.

We expect to see continued growth in this asset class as evidenced by the Study, which tells us that two-thirds of investors would like to access private equity and an even greater proportion amongst the younger cohort.”

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