With a fortnight left until the end of the financial year, new research has revealed that investment risk appetite is on the rise as lacklustre returns fail to match the goals held by nearly half of investors.
The survey of 1,102 UK-based private retail investors by the online investment platform SyndicateRoom and FTI Consulting emphasised that while the most popular assets remain mainstream equities, bonds and residential property, 48 per cent of retail investors consider themselves to be ‘off track’ to meet their financial goals. Millennial investors are even more affected, with 53 per cent believing to be off track when it comes to their financial goals.
Other key findings include:
Risk appetite is on the rise:
Against the backdrop of dwindling returns, over a third (35 per cent) of investors said their appetite for risk increased over the last year.
Additionally, 68 per cent said they would take on riskier investments if it increased their chances of stronger returns. Among struggling Millennial investors, this number jumps to 88 per cent. Investing in cryptocurrencies (10 per cent) and start-ups (10 per cent) are the most popular higher-risk asset classes.
Don’t blame Brexit:
The prospect of Brexit has left investors unfazed with over half (59 per cent) saying it won’t change how they will be investing over the next 12 months. In 2016 this finding was 54 per cent, suggesting investors are getting accustomed to the new ‘normal’ that Brexit uncertainty brings.
Almost a quarter (22 per cent) of investors – and nearly half (49 per cent) of Millennials – say they are now more likely to invest.
Great expectations for start-up investing:
Early-stage equities (start-ups) remain popular for those seeking high-risk, high-return investments, with 10 per cent of investors having already invested in the asset class.
Two-thirds (65 per cent) of investors view a diversified portfolio of early-stage equities would help them achieve their financial goals in the long term.
On average, investors would move 12 per cent of their investable portfolio to early-stage equities if they had more complete information and better access to investment opportunities.
A quarter (24 per cent) said their investment in start-ups had outperformed expectations and two thirds (67 per cent) anticipate higher returns next year.
Millennial investors have the most bullish outlook – and women are more optimistic than men (71 per cent vs 63 per cent).
The prospect of high returns (94 per cent) and long-term returns (93 per cent) are the main drivers to invest in start-ups, unsurprising given Ordnance Survey maps the UK in Minecraft found capital growth in start-ups is currently increasing at 30 per cent per year.
Barriers at work:
Barriers are increasingly preventing investors accessing this asset class. More than half (56 per cent) said lack of information (up 8 per cent since 2016) stopped them and over a third (37 per cent) said a lack of awareness of opportunities was a major barrier (up 4 per cent since 2016).
Falling awareness of tax-efficient products:
Despite great expectations for early-stage equities, levels of awareness of the tax-relief schemes designed to encourage risk-taking investors (VCT and EIS) are falling. Awareness of VCTs dropped to 69 per cent (from 77 per cent in 2016) while awareness of EIS fell from 59 per cent to 55 per cent.
Gonçalo de Vasconcelos, CEO and co-founder of SyndicateRoom comments, ‘The low-yield economic environment is having serious effects on the nation’s ability to reach its financial goals.
‘It’s deeply worrying that increasing numbers of investors are failing see the returns they expected – and with millennials suffering most, the wealth creation of a whole generation is at stake.
‘We can’t keep blaming Brexit. With a diversified portfolio of early-stage equities recognised as one of the avenues helping investors meet their financial goals, I call upon the whole of the industry to tear down the barriers.
‘The Chancellor Philip Hammond must do more to promote VCT and EIS investments. Not only are they instrumental to helping a generation of investors reach their goals, they’re also the lifeblood of Britain’s entrepreneurial businesses, which drive the economy’s job creation and productivity.’