Aussie investors swap literacy for optimism

A new Schroders study has found Australian investors’ confidence in their financial knowledge has dropped despite their rising confidence in generating better returns.

The latest Schroders Global Investor Study 2023 (GIS) revealed 60 per cent of Australian investors believed they had ‘expert’ or ‘advanced’ knowledge in 2023, a 10 per cent drop from 2022. Only 47 per cent of global investors also said they had the same level of knowledge, down nine per cent from the previous year.

The study showed that while returns have fallen for investors, their expectations for the next five years have grown compared to 2022, with most looking to pivot their investment strategy and adapt to the changing “regime in policy and market behaviour”.

“What is undeniable is that we are entering a new investment regime when it comes to policy and market behaviour and that most investors have adjusted, or will be looking to adjust, their investment strategy,” Ray Macken, Head of Client Group at Schroders, said.

“Investors will continue in search of expert guidance in this new regime as volatility has returned, and therefore so too has the opportunity set for active management. We feel ‘higher for longer’ is a much better environment for stock-pickers and asset allocators.”

In the Australian investment landscape, thematics such as internet and technology (51 per cent) and real estate (48 per cent) have become much more popular in the past 12 months.

The GIS found 39 per cent of Australian investors were interested in private assets as an investment vehicle and its opportunities for “competitive returns and diversification”, with most believing they can easily access the asset class through their financial adviser.

Investors were also more attracted to private asset components that they are more familiar with, including private equity and real estate.

“The Australian investor experience is largely shifting alongside global trends. Recent economic and market volatility has definitely hit the confidence of many investors in Australia, but it’s hardly a unique trend and is something that is clearly being felt right around the globe,” Macken said.

“That more Australian investors are considering private assets as an investment vehicle is interesting, however, there needs to be more and better investor education around the asset class.

“Many underestimate the holding times required for private assets investing as well as its illiquidity, believing it is one year or less when in fact it takes many years to realise returns on investment.”