SINGAPORE (Nov 29): Try making sense of this latest study of Singapore investors conducted by Natixis Investment Managers.
More than six in 10 Singapore investors surveyed or 64% believe index funds are less risky than other investment vehicles. And two thirds (67%) believe index funds can help them minimise loss of returns while 66% of Singapore investors -- vs 58% globally -- trust that index funds can help them access the best opportunities in the market.
But while Singapore investors are adopting a more defensive approach to portfolio construction -- with nine out of 10 also saying it’s important to be protected from volatility -- they are not willing to forego investment returns, expecting an average annual return of 9.6% above inflation.
Meanwhile, 86% of Singapore investors (vs 75% globally) say that when it comes to investing, it is important to beat the benchmark. A slightly smaller number (82% vs 74% globally) say it is important to take advantage of short-term market movements.
However, Singapore investors are wary of asset managers who charge an active management fee but build portfolios that closely resemble their benchmark.
In addition, more than seven in 10 (76%) worry that fund managers charge high fees even if they’re just tracking an index, and 45% do not think that their fund managers provide value for money.
What makes the survey more interesting is a higher percentage of Singapore investors (68%) compared to their global peers (66%) claim to know the difference between active and passive investing.
This means some investors may be hearing only a part of the ongoing active-passive dialogue that focuses on fees.
“Our findings reveal that when investors see a lower fee, they tend to extrapolate much greater advantages for passive investments than they actually can deliver,” says Dave Goodsell, Executive Director of the Natixis Center for Investor Insight.
Indeed, the current environment of heightened market volatility is driving investors to take a more cautious approach to investing with more than nine in 10 (91%) placing importance on protecting assets and better controlling risk. Individual investors, however, do recognise the need to look beyond current market noise, with an overwhelming majority (88%) highlighting the importance of long-term returns over short-term goals.
”There is a myth among investors that index funds are less risky than other investments. They’re not. Passive funds have no built-in risk management and investors’ assets are exposed to the same level of risk that’s presented by the markets at large,” adds Goodsell.
The independent survey of 400 individual investors in Singapore – part of a global study of 9,100 investors in 23 countries in different regions – also found that despite the gains they have made since 2008, investors are wary of a world that has changed dramatically and struggle to make sense of what it all actually means for their investments. For example, only close to six out of 10 investors feel financially secure, compared to 70% globally.
“We encourage investors to realise that with any investment vehicle they can potentially enjoy the gains when markets are up, but can also experience a loss when markets are down,” says Goodsell.