• Local Isle of Man investors increase cash investments
• Long term portfolio diversification current priority
• Positive outlook in commodities markets
• Investors consider emerging markets ‘too risky’
Recent research conducted by Lloyds TSB Private Banking suggests private investors are responding to on-going volatility in financial markets by selling higher risk investments and holding more cash than at any time in the past three years. For the first time ever this survey includes Manx investors as well.
The bi-annual Investor Outlook Survey by Lloyds TSB Private Banking reveals that over a quarter (26 per cent) of UK investors increased their cash allocation in the past six months, against only 14 per cent who decreased it. This trend is set to continue with 19 per cent of investors planning to up their cash exposure in the next six months, while only 11 per cent plan a decrease.
Emerging market investments, once the rising star of financial markets, saw a sharp decline in investor appetite over the past six months according to the findings. In this short period, the portion of UK investors surveyed that have increased their allocation to these markets has dropped from 29 per cent in the previous Investor Outlook Survey to only 9 per cent now.
The Lloyds TSB Private Banking research also suggests a growing perception that the UK is a relative safe haven from the volatility afflicting global financial markets. On the Isle of Man the situation is much the same with investor attitudes indicating that they too consider themselves relatively sheltered from global market volatility. Findings suggest that 30 per cent of local investors increased cash investments over the past six months as opposed to the 15 per cent who decreased it. By comparison, commodities investments presented the most positive outlook for the Island with a 45 per cent positive outlook (compared to 32 per cent globally) and only 23 per cent negative.
Concerning the impact of any economic downturn in emerging markets over the next six months in particular, Island investors join those of Guernsey, Jersey and Switzerland as the top four nations which remain ‘not at all concerned’, at 11 per cent. Similarly, despite their increased investment in the class, the prospect of falling commodities prices has not deterred Island investors due to the diversification of their investment portfolios, with a total of 71 per cent stating that they are either ‘not at all concerned’ (9.4%), ‘not very concerned’ (15.1%) or ‘neither concerned nor unconcerned’ (47.2%). This finding is further compounded by results showing that just 6 per cent of Island investors are concerned about the lack of diversification of their portfolio and the impact this may have on their investments over the next 12-months.
Overall, and in comparison to the rest of the world, Isle of Man investor holdings constitute the following:
Premium Bonds: 62.3% Isle of Man – 35.8% rest of world
Fixed Term Deposits: 41.5% Isle of Man – 27.9% rest of world
Stocks and Shares: 62.7% Isle of Man – 67.2% rest of world
Despite this, however, the Island’s investors were also largely in agreement with the proposed statement that ‘emerging markets are generally too risky’ to enter into, indicating a conservative stance towards uncharted investment territories. 42 per cent agreed with the statement compared to a global average of 15 per cent. This goes hand-in-hand with findings that present some cause for optimism both locally and in the UK, which showed that investors forecasted positive economic growth of 30% over the next three to five years and 45% over the next 10 years. This positive outlook correlates with current investment performance satisfaction rates amongst Island investors, who join those of New Zealand and South Africa in being amongst the top three nations to state that they are currently ‘very satisfied’ with the performance of their savings and investments, at 11 per cent.
Commenting on the findings, Nicholas Boys Smith, Director, Lloyds TSB International Wealth, stated: “Whereas elsewhere in the UK investors appear to be shielding themselves from market volatility, those on the Island are now building upon what has been an extended term of caution and conservatism with increased cash investments and commodities purchases. Many have become very risk averse when it comes to any short-term, high return purchases and have instead chosen to secure their investments with fixed assets, fixed term deposits and premium bonds. This creates more balanced investment portfolios, which are more diverse and thus less susceptible to danger in what remains a tumultuous investment landscape for all.”
Elsewhere in the world, emerging nations such as China and Brazil offer the highest potential for investors and China, India, Brazil and the UK were charted as the most attractive World Financial Markets, or WFMs. Overall, results shown denote a positive forecast for UK markets and sustained growth leading to investor confidence locally, indicating that, despite continued economic pressures, there is some cause for optimism over the coming years.
