Investment crowdfunding platform SyndicateRoom is out with new research that indicates investment risk appetite is increasing while returns fail to match the goals held by nearly half of investors.
“The low-yield economic environment is having serious effects on the nation’s ability to reach its financial goals,” said Gonçalo de Vasconcelos, CEO and co-founder of SyndicateRoom. “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.”
According to a survey of 1,102 UK-based private retail investors by SyndicateRoom and FTI Consulting, the most popular assets remain mainstream equities, bonds and residential property. The data indicates that 48% of retail investors consider themselves to be “off track” to meet their financial goals. Millennial investors are even more affected, with 53% believing to be off track when it comes to their financial goals.
SyndicateRoom says that the appetite for risk is rising. Against the backdrop of diminishing returns, over a third (35%) of investors said their appetite for risk increased over the last year. 68% said they would take on riskier investments if it increased their chances of stronger returns. Among Millennial investors, this number jumps to 88%. Investing in cryptocurrencies (10%) and start-ups (10%) are the most popular higher-risk asset classes.
SyndicateRoom adds that Brexit is not the cause. Investors (59%) indicate the European divorce will not alter how they invest over the coming year. In 2016 this same data point was 54%, suggesting investors are getting accustomed to the new normal of Brexit.
Early-stage investing (start-ups) remains a popular option for those seeking higher-risk, higher-return investments, with 10% of investors having already invested in the asset class. Two-thirds (65%) of investors view a diversified portfolio of early-stage equities will help them achieve their financial goals in the long term. On average, investors would move 12% of their investable portfolio to early-stage equities if they had more complete information and better access to investment opportunities.
A quarter (24%) said their investment in start-ups had outperformed expectations and two thirds (67%) anticipate higher returns next year. Younger investors have a more bullish outlook – and women are more optimistic than men (71% vs 63%). The prospect of high returns (94%) and long-term returns (93%) are the main drivers to invest in start-ups, unsurprising given recent research found capital growth in start-ups is currently increasing at 30% per year.
Information and awareness continues to be an issue as more than half or respondents (56%) say they are not aware of opportunities – an increase since 2016.
Tax benefits, designed to subsidize investment in early stage companies is falling as well. Awareness of VCTs dropped to 69% (from 77% in 2016) while awareness of EIS fell from 59% to 55%.
de Vasconcelos says 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.”
The entire report is available for download once you provide your name and email address.