No market rally, a second recession and inflation - these are among the major concerns facing UK investors, according to a recent survey undertaken by iShares.
The results reflect a shift in overall investor sentiment, with the majority of those surveyed moving money into less-risky asset classes despite a recent upturn in market activity.
“I wouldn’t call it pessimism, but rather, investors have become more risk-averse,” said Nizam Hamid, head of sales strategy at iShares in Europe.
IShares, which offers exchange-traded funds (ETFs), based its findings on the most recent ETF selections made by investors.
Investors, for instance, have begun switching to more defensive portfolios. Fifty-five per cent said defensive, rather than cyclical stocks should form a bigger proportion of the portfolio.
Another sixty-one per cent believe that economic conditions will worsen and lead to a second recession, while 63 per cent foresee inflation to rise in 2010.
The pessimistic outlook has led investors to explore safer asset classes, such as fixed income.
Mr Hamid said investors have poured €3.3bn (£2.96bn) into corporate bonds over the past year.
“Furthermore, in the past six months, inflation linked ETFs have attracted €1.1bn (£980 m) of assets as investors consider the risks to current price stability. In addition, we’ve also seen a shift towards more defensive sectors such as utilities.”
The survey also revealed an increased interest in emerging markets. Seventy-eight percent of investors believe that once the rececession ends, developing countries will be well-positioned to overtake the west in economic growth.
”For example, over the past twelve months, an interesting trend has been the strength of flows into emerging market countries which have totalled €2.2bn (£1.9bn) compared to flows of €1.8bn (£1.6bn) into developed market countries, in the Exchange Traded Product space.”
Mr Hamid added that investors are awaiting more economic results before they place bigger bets.
However, he said that the survey does reflect a general change in investor confidence, as they continue to opt for lower levels of risk.
