We polled several hundred European investors at 10 Expert Investor forums across the continent this year on the return expectations for their bond and equity portfolios over the next five years. As most of them have reconciled themselves with minimal returns from fixed income going forward, a large majority also expect returns from equities to be lower compared to the previous five years.
The MSCI Europe returned 8% annually over the past five years, while the MSCI World generated almost double that in euro terms. In a sign investors are preparing for a couple of weak years for equities, less than a third of investors are expecting annual returns of more than 6% over the next five years. The majority of fund buyers (59%) count on returns between 3% and 6%. That’s less than half the returns they have been used to over the past few years, but it’s still a lot more than their default expectation for bond returns, which 0-2%.
Rico Bosma, a fund analyst a Wealth Management Partners in the Netherlands, is one of these fund buyers who have reduced their return expectations, though not by as much as most of his peers. “Our expected annual return is now 6.5% after all costs. This compares to an average equity return of 10.41% from 2011 to 2015,” he says.
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Spanish fund buyers are Europe’s most upbeat equity investors: close to half of them expect their equity portfolios to return in excess of 5% over the next five years.
The Spanish optimism contrasts with a much more measured attitude in other financial centres. In Portugal, Denmark and Monaco hardly more than one in 10 investors expect their equity portfolios to return more than 10%.
