Investors remained cautious over 2012, with many parts of the industry languishing while select pockets grew strongly, according to a new report released last week from leading wealth researcher Investment Trends.
Based on a survey of 9,537 Australian investors, the seventh annual edition of the Investment Trends November 2012 Investor Product Needs Report is an in-depth study of the Australian investor population and their demand and usage of a wide range of investment products.
“2012 was another tough year for the Australian investment industry. Investors remained fearful with muted return expectations leading many to remain on the sidelines in cash. That said, there were some bright spots” said Investment Trends Principal Mark Johnston.
As investors remained cautious, they continued to focus less on capital growth and more on income. This continued change in focus has helped shape the demand for different products, particularly hybrid securities, where investor numbers increased 21% from 2011 levels to 75,000 as at November 2012. Self managed super funds remained the dominant holders of hybrid securities, accounting for two-thirds of the market (by investor numbers).
Over the year to November 2012, the number of active warrant investors rose 34% from 26,000 to 35,000 as the number of warrants on issue increased 28% over the same period, filling a vacuum that had existed for these products for the last few years.
Index funds and exchange traded funds (ETFs) saw growth as investors remained very cost focused.
UBank has the happiest cash clients
“Providers of cash accounts, term deposits and online savings accounts also did very well over 2012. Of particular note is NAB’s UBank, which had the highest levels of client satisfaction of any cash product provider.
That said, they remain vulnerable in spite of this satisfaction since a large proportion of thers are rate-chasers who are willing to switch providers if a better offer comes along,” said Johnston.
Despite a falling cash rate and the performance of the Australian share market, investors’ cash holdings continued to build up, with a corresponding increase in excess cash – cash that would normally have been invested in other investments/assets.
Green shoots appearing in 2013
“Over the last few years investors continued to hold and accumulate cash (and excess cash). When we ask them what would prompt them to invest this extra cash, increased confidence in the market and economy are the major catalysts cited,” said Johnston.
“Since the end of 2012 though, we have seen a big spike in investor return expectations, which rose from 3%p.a. in September 2012 to 8%p.a. in February 2013, a 20-month high. This rising sentiment is thus a very significant development for the Australian investment industry.”
