The Economist Intelligence Unit Research

I was one of a few advisers that recently took part in a survey sponsored by Goldman Sachs for the EIU. The survey was only from a small sample of advisers (289) as well as private investors, but never-the-less makes some interesting reading (well for me it does). I wonder if you would agree with the findings? perhaps you would let me know?


1. Only a minority of investors think the recent financial crisis was as bad as it can get: Despite the wild swings in financial markets at the peak of the crisis, just 14% of respondents said the volatility was ‘beyond anything I could have imagined’ while 28% said it was ‘within expected volatility’. Nearly half of the respondents (41%) believe that market volatility was merely ‘unusual’ compared with their ‘worst-case scenario’ expectations.

2. Investors now realise there is no such thing as a ‘safe haven’: Perceived risk in all asset classes has gone up and the `safe haven' status of asset classes such as cash and fixed income has been challenged. Over half of respondents say they view investing in stocks, bonds, property, private equity and hedge funds as slightly or much riskier than before, with commodities being the slight exception: just 35% of respondents believe investing in commodities is riskier than it used to be.

3. British private investors are more open to taking risk to achieve their investment goals than mainland European investors: Over a quarter (27%) of investors in the UK describe themselves as adventurous or somewhat adventurous, compared to just 9% of continental investors. Also, 64% of British investors agree or strongly agree that they are willing to choose high-risk investments in order to achieve high returns, compared to just 32% of European investors. Financial advisers concur that Europeans have become more risk adverse due to the crisis, with 88% of continental advisers agreeing or strongly agreeing, compared to 61% of British advisers.

This may also affect views on the world economy, with 61% of UK respondents expecting a mix of strong growth in emerging markets and low growth in developed markets, compared to just 37% of mainland Europeans. Almost half (46%) of Europeans expect low growth overall.

4. British private investors believe they were less affected by the crisis than their continental counterparts: Less than a quarter of private investors in the UK (23%) say their investments suffered more or significantly more than expected during the financial crisis, compared to 43% of mainland European investors. No investors in the UK and just 5% in continental Europe say that all personal goals have been put at risk and 18% and 14% respectively say that some will not be achievable, but 46% of UK investors say the crisis had very little or no impact on their goals, compared to 36% of continental Europeans.

Monica Woodley, Senior Editor within the Business Research division of the EIU, said: “We were surprised by how many investors said that the volatility of the financial crisis was merely ‘unusual’, rather than ‘once in a lifetime’ or ‘beyond anything I could imagine’, which is certainly how investors described it while in the throes of the crisis. However the fact that they now feel individual asset classes are riskier shows that the crisis has had a long-term impact on perceptions. This may be a sign that investors now realise there are no ‘safe’ investments and avoiding certain asset classes does not avoid risk. Risk cannot be avoided but it can be managed, for example through diversification, and it can be better understood."