When asked about their return prospects at Expert Investor Denmark in Copenhagen last week, three quarters of delegates said they expect an annualized return of 6-9% from a diversified equity portfolio over the next five years. By contrast, the majority foresee a return of only 0-2% from a diversified bond portfolio over that period.
Though the Danes on average expect higher returns from equities than their peers in Stockholm, Amsterdam and Brussels, they are less keen on increasing their allocation for the moment. Only for European equities more people want to increase allocation than plan to decrease exposure, though sentiment is less upbeat than the Pan-European average. For most other equities, buyers and sellers are balanced.
‘Nei’ to absolute return
To illustrate their cautiousness, a small majority of delegates also admitted to be in risk-off mode at the moment. That doesn’t translate, however, in an increased appetite for absolute return. The Danes have never been keen on the asset class, partly because of their large institutional investor base, and there are no signs that will change: half remain not invested, and only 19% plan to increase their allocation. Moreover, long/short strategies are not their cup of tea at all. From long/short bonds to global macro, they just don’t want it.
So what are those risk-off Danes doing instead to protect their portfolios? They could opt for cash, though that’s not that attractive considering interest rates are even lower in Denmark than in the eurozone. A look at the Danish fund management association’s fund flow figures indeed shows that Danish investors are as capricious as the markets they are investing in. In July, they sold equities and bought bonds, while the pattern reversed in August.
Click here for an overview of the voting results from Expert Investor Denmark.
And click here to see a slideshow of photos taken at the event.