SANTIAGO, CHILE--(Marketwired - Mar 24, 2014) - One of the largest surveys of its kind, the 2014 Franklin Templeton Global Investor Sentiment Survey polled 11,113 investors in 22 countries across Africa, Asia Pacific, the Americas and Europe on their current attitudes towards investing and their expectations for 2014 and the decade ahead.
Five years after the onset of the 2008-2009 market downturn, investors continue to show signs of risk aversion, despite an optimistic outlook for the future. Globally, 52 percent of investors are planning to become more conservative with their strategies this year, taking on less risk with the potential of earning lower returns. In Chile, risk aversion is more pronounced with 64 percent of investors planning to adopt more conservative strategies in 2014 and even more noticeable than last year when the annual survey showed that 51 percent of investors planned to be more conservative with their investments.
"In the long term, the greatest risk investors run is remaining too risk-averse for too long, building portfolios based on short-term phenomena, not long-term realities, which puts them in danger of falling well-short of their goals. A smart approach to managing investment risk is not to categorically avoid risks but to ensure that risks taken are intended, understood and appropriately compensated with an eye on achieving longer-term investment goals," said Sergio Guerrien, Franklin Templeton's Director and country head for South America ex-Brazil.
This trend towards conservatism runs counter to the fact that most Chilean investors expect high returns from their investments this year, as well as the fact that a majority (94 percent) are still optimistic about reaching their financial goals.
Investor Perceptions vs. Market Realities
The survey has shown that investor perception often diverges from reality, a fact that may impact investors' ability to make well-informed investment decisions. In 2013, most Chilean investors believed their stock market would be up, when in reality, the Chilean equity market experienced negative performance. This affected investor's perceptions for 2014, which although positive overall, decreased from 83 to 67 percent of survey respondents that consider the market will be up, and increased the percentage of investors who think the market will be down (from 8 to 19 percent).
Investors See Risk and Reward Potential in Stocks
While investors see potential in stocks this year, they also recognize the risks involved with investing in the asset class. In Chile, the US dollar, stocks and the Euro topped investors' lists of the asset classes they believe will carry the most risk this year.
"Renewed enthusiasm for stocks is encouraging, as many investors will need the higher potential returns stocks have historically provided over the long term in order to reach their financial goals. It is also clear that investors recognize higher returns are likely accompanied by higher risk," said Sergio Guerrien.
Investors Look Beyond their Borders for Opportunity
Globally, two-thirds of investors believe the best equity and fixed income opportunities will be found outside their home countries this year, echoing findings from Franklin Templeton's 2013 survey.
Investors in Chile showed great interest in investing abroad, with 79 percent believing the best equity opportunities exist beyond their borders. Additionally, 74 percent believe the best fixed income opportunities will be found outside Chile.
Chilean investors who are looking to invest outside of Chile, are most likely to invest in China (48 percent), followed by Asia excluding Japan (29 percent), Latin America (22 percent) and the U.S. (21 percent), Brazil (19 percent) and Europe (16 percent).
"For both global equity and fixed income markets, 2013 was an eventful year as the global economy continued to recover from the financial crisis. Global financial and economic conditions generally improved during the course of 2013, and we anticipate the trend likely to continue in 2014. As the nature of global investing continues to evolve, investors can benefit from the perspective of a global asset manager with decades of experience navigating the world's markets," said Guerrien.
Where is the Money Heading? - Asset Class Preferences for 2014
On a whole, global investors indicate they are most likely to add real estate, home country and emerging market equities, as well as precious metals to their portfolios in 2014. More than one-third (36 percent) plan to increase their investment in real estate; Chilean investors are most likely to do so, with 64 percent planning to invest in real estate this year.
Stocks, Non-metal Commodities Lead Asset Class Expectations
In 2014, real estate, stocks and non-metal commodities topped the list of asset classes that investors expect to perform best in the year ahead. Almost half (44 percent) of Chilean investors believe stocks will be among the top-performing asset classes this year, slightly down from 46 percent in 2013. Investors' outlook for real estate and non-metal commodities stayed fairly consistent year-over-year.
Expectations on top-performing asset classes in 2014 and the previous year are the following:
|Perceived Top-Performers 2013
||Perceived Top-Performers 2014
|1. Real estate - 67 percent
||1. Real estate - 69 percent
|2. Precious metals - 50 percent
||2. Stocks - 44 percent
|3. Stocks - 46 percent
||3. Non-metal commodities - 42 percent
Additionally, more investors see potential in alternatives and consider this asset class will perform best in 2014 (22 percent) and over the next 10 years (21 percent) than did last year.
"Alternatives investments are increasingly gaining ground. In today's volatile investment environment, many investors are seeking additional ways to diversify their portfolios, including the addition of lower correlation total returns offered by alternative investments," said Sergio Guerrien.
Top Concerns about Investing In Europe and the US
When asked to rank their top concerns about investing in Europe and the US, Chilean investors showed the greatest concern about government fiscal issues and their drag on the economy.
When considering European investment opportunities, 28 percent of Chilean investors ranked "euro zone debt crisis" as their top concern. "Slow economic outlook" (13 percent) and "unstable domestic political environment" (13 percent) rounded out the top three concerns.
When considering the US, 30 percent of Chilean investors ranked "large fiscal debt" as their top concern, followed by "slow economic outlook" (11 percent) and "there are better opportunities elsewhere" (11 percent).
"What the survey results tell us is that Chilean investors have concerns about investing in Europe and the US despite the positive performance of these markets overall in 2013 (32 percent and 25 percent, respectively1), which is a clear disconnect," said Sergio Guerrien.
Benefits of Consulting a Financial Advisor
The survey results show that, globally, investors who work with a financial advisor have more diversified portfolios and are more likely to invest outside their home countries than those who don't work with an advisor. They're also more likely to be optimistic about reaching their financial goals and have higher expectations for their investment returns. "Navigating global markets can be a complex endeavor. These survey results show investors can benefit from working with a financial advisor to make fully informed investment decisions to appropriately position their portfolios," said Greg Johnson, chairman, CEO and president of Franklin Templeton Investments.
1. Based on MSCI USA Country Index and MSCI Europe Index, average annual return, Dec 31, 2013. Source: © Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
The Franklin Templeton Global Investor Sentiment Survey, conducted by ORC International, included responses from 11,113 individuals in 22 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia Pacific; France, Germany, Greece, Italy, Poland, Spain, Sweden and the UK in Europe, South Africa, and the United States and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America, Asia Pacific and South Africa and 25 and older in Europe and North America. Respondents were required to own investable assets, such as stocks, bonds, mutual funds, etc. In addition, a minimum investable asset threshold was set for each country to ensure that the respondent had sufficient investments, providing a knowledge base from which to answer the survey questions. The survey was completed from 2 to 15 January, 2014, in all countries.
About Franklin Templeton
Franklin Templeton has operating in Chile since 1995 and serves a wide array of institutional clients here and throughout the region. Franklin Templeton is among the top mutual fund providers to the successful Chilean pension system. In addition, the company offers nine Luxembourg-registered SICAV mutual funds, which are registered in the Registro de Valores Extranjeros de la Superintendencia de Valores y Seguros de Chile, through a distribution relationship with LarrainVial, a leading Chilean financial services company. Franklin Templeton mutual funds have been investing in Latin America since the since the early 1980s, and today the company has offices in Mexico City, Buenos Aires, Sao Paulo and Rio de Janeiro.
Franklin Resources, Inc. (NYSE: BEN) is a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2 investment teams. The San Mateo, CA-based company has more than 65 years of investment experience and over US$882 billion in assets under management as of February 28, 2014.
For more information, please visit www.franklinresources.com/encuestaglobal-chile or connect with Franklin Templeton on Twitter (@FTI_Global). Read the Beyond Bulls & Bears blog featuring perspectives from Franklin Templeton investment professionals around the world and the Investment Adventures in Emerging Markets blog from Mark Mobius (@MarkMobius), executive chairman of Templeton Emerging Markets Group.
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