Schroders Global Investor Study 2023: Hong Kong investors remain optimistic with vast majority expecting to achieve double-digit positive returns over the next five years

Despite elevated interest rates and inflation, Hong Kong retail investors showed unwavering confidence in the outlook of their investments, with 98% expecting to achieve positive returns over the next five years, Schroders Global Investor Study 2023 has found.

Schroders’ flagship study, which surveyed more than 23,000 people who invest from 33 locations globally, including 500 from Hong Kong, found that Hong Kong retail investors are anticipating an average of 11.21% annual return over the next five years. As much as 83% of those surveyed are expecting returns to be either identical to or higher than over the past 12 months. This was particularly the case amongst ‘advanced’ and ‘expert’ investors, with only 2% expecting returns in 2024 to be lower.

Regime shift highlights the importance of an active and agile approach to portfolio management

To navigate the shift to a new regime of market and policy behaviour as inflation and interest rates rise globally, 78% of Hong Kong retail investors said they would take an agile approach and change their investments at least once every year. This compares to 65% in Asia who said that they would do the same.

This year’s research shows that Hongkongers who rated their investment knowledge as ‘expert’ were the quickest to react with 72% having already adapted their strategy, while over a third (35%) who rated their investment knowledge as ‘rudimentary’ were yet to do so.

When asked about the investment themes they have been attracted to over the past six months, internet and technology (61%), sustainability (47%) and real estate (45%) were the top three among Hong Kong retail investors.

As the democratisation of private assets and desire to diversify continue to gather pace, over one third (39%) of Hong Kong retail investors said such assets have become more attractive under the current investment environment, with interest gathering around infrastructure and renewable energy (70%), private equity (65%) and real estate (54%). 60% of local respondents would invest in private assets because of their ability to provide diversification and 54% would do so in anticipating potentially higher investment performance. Yet, 76% still regard illiquidity or long-term holding periods as a barrier to entry for investing in private assets.

Meanwhile, retail investors continue to look to the guidance of financial advisors in managing their portfolios. Around half of the respondents in Hong Kong (51%) said the attractiveness of assets or mutual funds that are actively managed by fund managers have increased amid market changes, in line with their peers in Asia and globally (46% respectively).

The environment remains a priority for Hong Kong investors.

The appeal of sustainable investing, particularly environmental-focused options, continues to grow among the investor public. Most (98%) surveyed in Hong Kong indicated they are attracted to sustainable funds and nearly two-thirds (64%) expressed preference for funds that contain sustainability characteristics, compared to a global average of 50%.

When asked why, nearly 90% said they believe asset managers influencing companies that they are invested in to adopt sustainable practices will help them generate long-term value.

Specifically, climate (26%), natural capital and biodiversity (23%), and human capital management (22%) are the top three priorities that retail investors hope to see on the engagement agendas of their asset managers.

Those investors who have yet to consider sustainable investing say the flexibility to invest in line with personal principles, greater education, and more evidence that sustainable investments deliver better returns would encourage them to increase such holdings.

Gopi Mirchandani, CEO of Schroders Hong Kong, and Head of Strategy, Asia Pacific, commented:

“Retail investors in Hong Kong are on average seeking double-digit average returns over the next five years, even as the world moves into a new market regime of higher interest rates and low economic growth. The investment environment will increasingly be shaped by the ‘3Ds’ of deglobalisation, decarbonisation and demographics, and investors should remain flexible and seek diversification in the hope of achieving better risk-adjusted investment returns. The mass investor public in Hong Kong are also open to investing in private asset investments, other than the traditional public markets to achieve their desired objectives. In an increasingly complex investment landscape, our role as a global asset manager would be to raise awareness, and assist clients in navigating relevant public and private investment options that can help them achieve the types of returns and income they want, whilst making sense of returns and liquidity premiums.”

“Schroders has been expanding our suite of products that are included in the ‘List of ESG funds in Hong Kong’ which encompasses niche thematic investing, global multi-asset or the equities of individual markets, all backed by our sustainable investment approach. In this way, we mean to enable more investment opportunities for retail investors to meet their financial goals while bringing positive change to the environmental and social themes that matter most to them.”

To find out more about Schroders’ Global Investor Study 2023, please click here.