SANTIAGO, CHILE--(Marketwired - Apr 29, 2013) - Chilean investors, like investors in most countries, have a prominent home country investment bias, currently allocating 61% of their investments to Chile, but they expect that percentage to decline to just over 50% over the next decade as more investments are allocated to emerging markets, which currently account for 17% of their allocation but is expected to rise to 22% in 10 years.
These and other findings were revealed by the 2013 Franklin Templeton Global Investor Sentiment Survey which polled 9,518 investors in 19 countries across Asia Pacific, the Americas and Europe on their current attitudes towards investing and their expectations for 2013 and the decade ahead.
Chilean investors think the best equity returns by geography over the next year will come from Asia (28% of respondents), followed by Chile (27%), and that the best fixed income returns will come from Chile (28%), followed by Asia (20%). Over the next 10 years, their expectations show a similar pattern, with both equity and fixed income return expectations for Asia ranking highest, followed by Chile.
Optimism and Return Expectations
More than three-quarters (77%) of Chilean investors described themselves as optimistic or very optimistic about the stock market, the second highest percentage of any of the 19 countries surveyed. Two thirds (67%) of Chilean investors think they will be able to meet their long-term investment goals without stocks and indeed they have one of the lowest levels of stock ownership (29%) of all 19 markets surveyed. Chilean investors expect an average annual rate of return of 11% in 2013, and even better (16%) over the next 10 years, the survey showed. In addition, more Chilean investors say they will be adopting a more conservative investment strategy (51%) this year than will be adopting a more aggressive one (46%).
"What the survey results tell us is that Chilean investors expect double-digit investment returns with little or no risk, given their low levels of stock ownership, a clear disconnect," said Sergio Guerrien, Franklin Templeton's country head for South America ex-Brazil. "Portfolio diversification, including stock ownership, has historically proven essential to long-term investment returns, so some investor education is needed."
While Chilean investors show a growing interest in investing beyond their borders, they cite several concerns with doing so, including lack of knowledge about markets outside Chile (41% of respondents), impact of exchange rates on their investments (36%), and perceived greater risk in markets outside Chile (34%). Factors making them reluctant to invest this year include the state of the global economy (49%), the Eurozone debt crisis (41%) and low interest rates (38%).
Despite these barriers to global investing, Chilean investors do show a growing interest in their neighboring country, Brazil. Chilean investors are much more likely to think Brazilian equities and fixed income are good investments opportunities over the next 10 years (41% of respondents for equities, and 37% for fixed income), than bad ones (10% for equities and 13% for fixed income), although a large percentage are not sure (48% and 50%). Approximately 40% of Chilean investors say they are likely to invest in Brazilian equity or fixed income in 2013 or over the next 10 years.
Benefits of Working with a Financial Professional
Globally, those investors who work with a financial professional are more geographically diversified with their investments, had a more accurate view of past stock market performance and were more likely to identify themselves as being optimistic about reaching their financial goals (82%) than those who do not (76%).
"Navigating global markets can be complex and investors can benefit from working with a financial advisor to appropriately position their portfolios to meet their investment goals," said Guerrien. "These survey results underscore the importance of investor education, especially among younger investors, who have not experienced as many market cycles and whose attitudes may be especially influenced by more recent market volatility."
"Investors navigating global markets can also benefit from the resources and experience of a global asset manager," Guerrien added. "As for Brazil, whether Chilean investors are positive or undecided about investing there, having access to local expertise can be critical. Franklin Templeton has been investing in Brazil since the 1980s and today has an established Brazilian local asset management presence with equity, fixed income, and multimercado expertise."
Providing financial security for their families is top reason Chilean investors invest, followed by retirement and paying for education, according to the survey. Even among investors 55-65, only 36% say they invest primarily for their retirement.
Retirement was the top investment priority for investors globally, with about a third (31%) of investors selecting it as their top investment goal in 2013. The selection of retirement was highest in the United States and Canada (54%), while lowest among investors in Latin America (18%) and parts of Asia Pacific (29%). The top goal in those two regions is saving to purchase a new home (38% in Latin America and 31% in Asia Pacific). At 12%, Europe had the highest number of investors who indicated that saving for emergencies was their top goal.
For investors concerned about the perceived risks of global investing, having an experienced risk manager can be an important resource. Wylie Tollette, director of Performance Analysis and Investment Risk for Franklin Templeton Investments, said, "Many investors need to rethink risk and focus on the long term. Risk avoidance and risk management are two different things. Trying to avoid short-term risk and volatility entirely may expose investors to other kinds of risks, such as inflation and the impact of rising interest rates. These longer-term risks can negatively impact their ability to meet their financial goals."
Stocks, Precious Metals Lead Asset Class Expectations
Globally, stocks and precious metals were each selected by 21% of investors as the asset classes expected to perform best in 2013. However, those residing in developed markets generally have a more favorable outlook for equities, with Australia, Canada, Hong Kong, Japan, Singapore and the United States expecting stocks to be the top performing asset class this year.
As investors look further into the future, they expect real estate to outperform all other asset classes over a 10-year period, with the largest portion of investors (22%) seeing the greatest investment return in that asset class. Stocks and precious metals, each selected by 19% of investors globally, were not far behind.
In Chile, the expected top-performing asset classes in 2013 and over the next decade are:
Top-Performing Asset Class
Top-Performing Asset Class
|Real estate (67%)
||Real estate (61%)
|Precious Metals (50%)
||Precious Metals (54%)
The Franklin Templeton Global Investor Sentiment Survey, conducted by ORC International, included responses from 9,518 individuals in 19 countries: Brazil, Chile and Mexico in Latin America; Australia, China, Hong Kong, India, Japan, Malaysia, South Korea and Singapore in Asia Pacific; France, Germany, Italy, Poland, Spain and the UK in Europe, and the United States and Canada in North America. Survey respondents were between the ages of 25 and 65 in Latin America and Asia Pacific 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. Surveys were completed from January 14 to 25, 2013, in all countries.
About Franklin Templeton
Franklin Templeton has operating in Chile since 1995 and already 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 USD 823 billion in assets under management as of March 31, 2013.
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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