The recent turmoil in oil markets has many Canadian investors feeling cautious, according to a new survey from Natixis Global Asset Management.
The firm reports that the Canadian component of its latest global investor survey found that just over half of Canadian investors are afraid of future drops in oil prices, and 61% say they are unwilling to take more investment risk (compared with a year ago) because of that concern. Additionally, it found that 59% say they feel vulnerable to market shocks.
“Following last year’s deep drop in commodities prices, investors have good reasons to be concerned,” said John Hailer, CEO of Natixis Global Asset Management for the Americas and Asia. “This served as a reminder of the sometimes volatile nature of investment markets. Yet many investors haven’t really planned, or prepared themselves emotionally, for another market setback.”
In addition to oil prices, the firm found that the other top concerns for investors include a worldwide economic slowdown (54%), slower growth (39%) and higher interest rates (37%).
Despite these worries, the survey also found that Canadian investors are relatively optimistic. It reports that 75% of Canadians were happy with their portfolio performance last year, and 34% think their returns will be better this year; 53% say their returns will be the same, and only 13% expect them to be worse. For the year ahead, 31% expect stocks will be the best asset class, and 24% say real estate; followed by cash (12%), commodities (11%), private equity (9%), bonds (8%) and other types of investments (4%).
Natixis also reports that investors generally expect their portfolios to generate average annual gains of more than 9%, which mirrors their brief that they need to generate 9.3% annual returns, above inflation, in order to meet their retirement savings goals. However, the survey also found that relatively few Canadians have solid financial plans. It reports that just 38% of those polled (investors with more than $250,000 in investable assets) say they follow a financial plan.
“Retirement security is influenced by many factors, so it’s important for investors to plan for the unexpected,” said Ed Farrington, executive vice president for retirement for Natixis. “Investors should begin retirement planning earlier, save aggressively, invest effectively and understand their income needs in retirement under various scenarios.”
The survey also found that Canadians expect about 50% of their retirement income will come from saving, investing, selling their home or business, or work; 26% from a workplace pension; 18% from government support; and 6% from “other” sources (including support from children). Investors top concerns about paying for retirement, include uninsured health expenses (53%), inflation (52%), uninsured long-term care costs (48%), and failing to save enough money (47%).
The survey notes that while Canadians like the idea of alternative investments, such as hedge funds, private equity, and commodities, only 41% of Canadian investors own alternative products, compared with 50% of investors worldwide; and, just 34% say they have a good understanding of alternatives.
The results are based on a survey of 250 individual investors across Canada with a minimum of $256,460 of investible assets. The online survey was conducted in February as part of a global study of 7,000 investors in 17 countries.