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European investors count on 8.7% return

Chart depicing a growing trend of gold price. Isolated on white background.

The annual study of 22,000 global investors found that investors in Asia and the Americas are the most optimistic, expecting returns of 11.7% per year. These sky-high expectations are unlikely to be fulfilled however, even if investors plough all their asset into equities, if history is any guide.

Expectations versus reality

Even though global equities have been in a bull market for almost nine years now, the compound annual growth rate of the MSCI World Index falls short of investors’ return expectations going forward. The MSCI World Index, with dividend income reinvested, has provided annual returns of ‘just’ 7.2% over the last three decades.

Asset managers, who are generally not known for their pessimistic take on things, also expect most equity markets to fall far short of the returns expected by the investors polled by Schroders. JP Morgan AM expects developed market equities to return in the region of 6% annually over the long term. Only investors who invest the bulk of their assets in emerging market equities could come close to achieving their target return.

Sasha Miller, Head of Market Intelligence at Schroders, said investors’ high return expectations may  come back to haunt them, leaving investors “disappointed or result in them failing to meet their financial goals, such as saving for a pension.”

Part of the Bonhill Group.